U.S. Stocks Erase Loss, Treasuries Gains on Fed Minutes
U.S. stocks and commodities reversed declines, while the dollar slid and Treasuries extended gains, as Federal Reserve meeting minutes showed many policy makers backed more monetary easing soon.
The Standard & Poor’s 500 Index added less than 0.1 percent to 1,413.49 at 4 p.m. in New York after falling as much as 0.5 percent before the minutes. The S&P GSCI Index of commodities rose 0.2 percent, recovering from a 0.6 percent decline, as natural gas and nickel led gains. The Dollar Index, a gauge of the currency against six major peers, lost 0.4 percent to 81.6. Ten-year Treasury note yields slipped 10 basis points to 1.70 percent.
The record of the Federal Open Market Committee’s July 31- Aug. 1 gathering showed that “many members” believed more monetary accommodation would be needed fairly soon unless the pace of the economic recover picks up. Earlier declines in stocks today were triggered after a slump in Japan’s exports spurred concern about global demand.
“It’s similar to what the Fed governors have been talking about in recent speeches, but it’s positive and that’s why you’ve seen some market reaction,” said Christopher Orndorff, who helps oversee $450 billion as senior portfolio manager at Western Asset Management Co. in Pasadena, California. “It’s still a wait-and-see. The next GDP print will be important, the next employment numbers will be important.”
The S&P 500 has rebounded as much as 12 percent from a five-month low in June and yesterday climbed to its highest level in four years before erasing gains and ending the session lower. The rally has been driven by Europe’s efforts to fight its debt crisis, better-than-forecast economic data and speculation that central banks will provide more stimulus if needed to safeguard the global recovery.
Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.
“The Fed is ready, willing and able to be responsive to weak economic conditions,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4.5 billion in Raleigh, North Carolina, said in a telephone interview. “There’s a perception that officials want to be ahead of the curve rather than risk a further slowdown as we go through the rest of the year.”
Consumer, commodity and technology shares led gains among the 10 main groups in the S&P 500 today.
PulteGroup Inc. and D.R. Horton Inc. climbed more than 3.9 percent for the biggest gains in the index. Sales of existing homes climbed 2.3 percent to a 4.47 million annual rate in July, rebounding from an eight-month low and adding to signs U.S. housing may pick up in the second half. Toll Brothers Inc. advanced 3.8 percent, climbing to a five-year high, after the luxury home builder’s profit beat estimates.
Discover Financial Services climbed 3.9 percent to a record $38.43 and EBay Inc. rallied 2.5 percent. The two companies announced a payment-processing agreement in which customers of EBay’s PayPal unit can use their accounts at more than 7 million merchant locations that accept Discover.
Dell Inc. sank 5.4 percent after cutting its fiscal 2013 earnings forecast as sales of personal computers weaken, triggering losses in other technology shares. Lenovo Group Ltd. (992), the second-biggest maker of personal computers, sank 2.7 percent in Hong Kong. Samsung Electronics Co., the largest semiconductor manufacturer, lost 1.4 percent in Seoul.
The Stoxx Europe 600 Index retreated the most in almost three weeks, losing 1.2 percent. Mining companies led losses, with BHP Billiton Ltd. falling 1.7 percent in London after the world’s largest mining company put $68 billion of projects on hold. Rio Tinto Group, the third-biggest, declined 2.7 percent.
Cotton weakened for the first time in four days. Consumption of the fiber in China, the largest user, may shrink 11 percent this year, Zhang Hongxia, chairman of Weiqiao Textile Co., the country’s largest cotton-textile maker, said in an interview. Gold futures for December delivery rose after the release of the minutes, climbing 0.8 percent to $1,656.10 an ounce for a sixth straight gain.
The euro strengthened against 10 of 16 major peers. The shared currency recovered from earlier declines as European finance official Olli Rehn said Europe can overcome its debt crisis with determined work and the region’s central bank has an important role in ensuring stability in the financial system.
German Chancellor Angela Merkel signaled that she’s willing to discuss a Greek request for more time to meet the terms of its international rescue, leaving the door open to potential concessions. Merkel, speaking to reporters in the Moldovan capital Chisinau today, declined to discuss the request publicly before meeting with Greek Prime Minister Antonis Samaras in Berlin on Aug. 24, saying she’d “have the opportunity to communicate directly” with him on the matter then. “We won’t find solutions on Friday,” Merkel said.
“The global growth picture is still weak and this is evidenced by sluggish economic and corporate data,” said Allan Yu, who helps manage about $9.4 billion at Manila-based Metropolitan Bank & Trust Co. “These meetings in Europe will help set the global tone. If problems come about from these meetings, we will see a further deterioration in the global outlook.”
Vietnam’s benchmark stocks index slumped for a second day, losing 1.6 percent. The gauge plunged 4.7 percent yesterday, the most since 2008, as Vietnam’s arrest of Nguyen Duc Kien, the founder of several banks, sparked concern about the vulnerability of the country’s financial system.
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