Euro Falls While U.S. Stocks Erase Gains; Apple Tumbles
The euro snapped a five-day drop amid speculation that policy makers may expand Europe’s rescue fund. U.S. stocks erased gains in the last hour of trading as Apple Inc.’s results and an unexpected drop in new U.S. home sales outweighed a rally in financial shares.
The euro added 0.8 percent to $1.2155 as of 4 p.m. in New York. The S&P 500 was little changed at 1,337.91, reversing a 0.4 percent advance. Apple tumbled 4.3 percent after reporting iPhone sales that missed projections. S&P’s GSCI gauge of 24 commodities gained 0.6 percent. The pound weakened after the U.K. economy shrank the most in three years. Yields on five-, seven- and 30-year Treasuries touched all-time lows for a third straight day.
Demand for new U.S. homes fell in June from a two-year high, indicating the housing recovery will be uneven. There are arguments in favor of granting a banking license to the permanent bailout fund, said Ewald Nowotny, a European Central Bank council member who also heads Austria’s central bank. Granting a banking license to the ESM would give it access to ECB lending.
“We have a deepening recession in Europe, and a deceleration in North America, and that is leading investors to believe there’s going to be some sort of additional stimulus applied by the central banks,” said Peter Sorrentino, who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati.
The pound slumped 0.8 percent to 78.42 pence per euro. The U.K. economy shrank more than economists forecast in the second quarter as record rainfall and an extra public holiday sent output down the most in more than three years.
Treasuries fell, snapping a three-day advance, as speculation that European policy makers will boost the firepower of their bailout fund damped demand before the U.S. sold $35 billion in five-year notes. The securities drew an auction record yield amid lower-than-average demand. The yield on the benchmark 10-year note rose one basis points to 1.40 percent.
Apple fell the most since October. The company sold 26 million iPhones in the fiscal third quarter, compared with the 28.4 million predicted by analysts surveyed by Bloomberg. That caused it to miss quarterly sales and profit estimates for the second time since 2003.
“Apple is priced for perfection,” Mark Eibel, the director of client-investment strategies in North America at Russell Investments Ltd., told Bloomberg Television. “Other companies may be able to have a quarter like this but when Apple does it, it will move markets around the world. It’s certainly not what this market is looking for.”
A gauge of homebuilders in S&P indexes slid 3.2 percent. Sales of new U.S. homes fell 8.4 percent to a 350,000 annual rate, the weakest since January, the Commerce Department reported today in Washington.
Boeing gained 2.8 percent. The company raised its forecast for full-year profit to $4.40 to $4.60 a share from his April prediction of $4.15 to $4.35 a share. Caterpillar (CAT) Inc. rallied 1.6 percent to $82.75. The largest maker of construction and mining equipment raised its full-year earnings forecast as increasing demand from North American builders and overseas miners bucks an economic slowdown.
Earnings have exceeded analyst estimates at about 71 percent of the 196 companies in the S&P 500 that reported so far this quarter, according to data compiled by Bloomberg. Sales rose an average 3.3 percent and profits are down 0.5 percent.
Oil in New York gained 0.6 percent to $88.99 a barrel. Crude dropped as much as 1.9 percent after an Energy Department report showed U.S. stockpiles unexpectedly climbed as production surged to the highest level in 13 years. Wheat jumped 2.8 percent after falling 3.7 percent yesterday, and corn climbed 1.3 percent, the first gain in three days.
The Stoxx 600 was little changed after a three-day, 4.3 percent decline. Lonza Group AG rallied 3.7 percent as the Swiss drug-ingredient maker reported earnings that exceeded estimates. BT Group Plc, the U.K.’s largest fixed-line phone company, sank 3.3 percent after first-quarter sales trailed behind analyst projections.
The MSCI Emerging Markets Index lost 0.2 percent, its fourth day of declines. The Shanghai Composite Index slid 0.5 percent to the lowest level since March 2009 as the International Monetary Fund said the country’s economy faces significant downside risks and investors speculated the government won’t loosen property curbs.
South Korea’s Kospi slid 1.4 percent, the most among emerging-market gauges today, to the lowest level since Oct. 10. Bank of Korea Governor Kim Choong Soo said the nation risks failing to meet a growth estimate for 2012 that the central bank already cut two weeks ago because of Europe’s debt crisis.
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