U.S. stocks trimmed losses as Apple Inc. (AAPL) rose and speculation grew that European leaders will take new steps to tame the debt crisis. Spanish and Italian notes jumped on bets the European Central Bank will buy the debt.
The Standard & Poor’s 500 Index lost 0.1 percent at 4 p.m. in New York, erasing most of a 0.7 percent drop as Apple rallied on speculation it is preparing to introduce a new iPhone. Ten- year Treasury yields increased three basis points to 1.57 percent, while gold topped $1,700 an ounce for the first time since March. Spanish and Italian two-year note yields dropped at least 26 basis points. FedEx Corp. (FDX) slumped 3.2 percent after regular trading as it said earnings will be short of forecasts.
ECB President Mario Draghi said the central bank’s primary mandate compels it to intervene in bond markets to wrest back control of interest rates and ensure the euro’s survival. Draghi “appears willing to write two- to three-year ‘checks’” to debt-strapped euro-bloc nations in a reflationary move, Bill Gross, co-chief investment officer and founder of Pacific Investment Management Co., said in a Twitter post.
The ECB’s plan “to stabilize Europe takes the big-event risk off the table,” Frank Ingarra, who helps manage $1.4 billion at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. “Everyone is kind of digesting and getting back to the game today.”
U.S. markets were closed yesterday for the Labor Day holiday.
The S&P 500 (SPX) slid to its low of the session in morning trading today after a report from the Institute for Supply Management showed U.S. manufacturing contracted for a third straight month in August, marking the longest slide since the recession ended. Data released yesterday in China showed that manufacturing shrank at the fastest pace since 2009.
The market rebounded as Apple extended gains, with the world’s most-valuable company closing the session up 1.5 percent at $674.97. The company sent out invitations to a Sept. 12 product event in San Francisco, where it is expected to introduce a redesigned iPhone.
FedEx lost 3.2 percent at 6:15 p.m. New York time, after it said earnings for the quarter ended Aug. 31 will be short of its forecast after a weak global economy damped revenue from express shipments. FedEx, operator of the world’s largest cargo airline, is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals.
Gauges of commodity, industrial and consumer-discretionary companies had the biggest declines among the 10 main groups in the S&P 500 today, while telephone and consumer staples companies rose the most.
Netflix Inc. slumped 6.4 percent after Amazon.com Inc. reached a deal with pay-television channel Epix. Peabody Energy Corp. lost 3.4 percent as Dahlman Rose & Co. cut its recommendation on the company’s stock. Valeant Pharmaceuticals International Inc. rallied 15 percent after agreeing to buy Medicis Pharmaceutical Corp. for $2.6 billion. Medicis surged 38 percent.
The S&P 500 rallied with commodities and Treasuries on Aug. 31 as Federal Reserve Chairman Ben S. Bernanke said he wouldn’t rule out more stimulus to lower a jobless rate he described as a “grave concern.” The gain wasn’t enough for the S&P 500 to avoid a second straight weekly decline as concern over the global economic recovery overshadowed the Fed.
The S&P 500 jumped 2 percent in August, a third straight monthly gain, and is up 11 percent in 2012 as leaders in Europe worked to tame the debt crisis and the Fed vowed to safeguard the economic recovery.
Bank of America Corp.’s measure of Wall Street bullishness for stocks remains near its lowest level since 1985, a sign investors should buy equities, according toSavita Subramanian, the firm’s head of equity and quantitative strategy. Strategists recommended holding 44.4 percent of investments in stocks in August, close to the bottom of 43.9 percent reached the prior month, the Bank of America report said.
“Given the contrarian nature of this indicator, we are encouraged by Wall Street’s lack of optimism,” New York-based Subramanian wrote in the note today. “The indicator remains firmly in ‘buy’ territory, a signal that it first flashed in May.”
Jonathan Golub, chief U.S. equity strategist of UBS AG, lowered his estimates for S&P 500 profits in 2012 and next year, citing a weaker outlook for the world’s largest economy, slower growth overseas, a strengthening dollar and difficult operating environment for financial companies. His projection for combined earnings by companies in the benchmark equity index this year is now $102.50 a share, down from $103.50. He cut his estimate for profit in 2013 to $107 a share from $110.
Profits are moving U.S. equity prices more than any time since the bull market began 3 1/2 years ago, rewarding investors for picking stocks based on company data instead of following the herd rocked by Europe’s debt crisis and the slowing U.S. economy.
Companies in the S&P 500 rose or fell an average of 4.4 percent the day after releasing results since July, according to data compiled by Bloomberg. The last time they moved more was in the second quarter of 2009. Daily moves in the benchmark gauge narrowed to 0.4 percent last month from 2.2 percent a year ago, as economic and policy changes battered investors. More than 475 S&P 500 stocks moved in the same direction in six of the first nine days of August 2011, with all 500 down on Aug. 8.
Treasury 10-year yields increased from the lowest level in almost a month. U.S. total debt outstanding, which includes securities held by the public and intragovernmental holdings, rose past $16 trillion. The figure was $9 trillion in 2007.
Corporate issuers led by Deere & Co. and Honda Motor Co. offered the most dollar-denominated debt today in almost six months after yields on U.S. investment-grade bonds dropped to a record low. Deere, the largest maker of agricultural equipment, and Tokyo-based Honda led borrowers selling or planning to sell at least $16.4 billion of bonds, according to data compiled by Bloomberg.
The Stoxx Europe 600 Index slid 1.1 percent today as automobile, technology and mining companies led the retreat. Vodafone Group Plc fell 2.6 percent after Sanford C. Bernstein & Co. downgraded the world’s second-largest mobile-phone operator. Royal Ahold NV rose 2.5 percent after saying it may sell its 60 percent stake in Scandinavian retailer ICA, possibly through an initial public offering.
Ashtead Group Plc, a U.K. construction-equipment rental company with most of its business in the U.S., surged 12 percent to a record after saying full-year earnings will be “materially better” than previously forecast.
Leaders met in Rome and Berlin today, two days before the ECB holds its policy meeting. Mounting his strongest case yet for ECB bond purchases, Draghi told lawmakers in a closed-door session at the European Parliament in Brussels yesterday that the bank has lost control of borrowing costs in the 17-nation monetary union. Bloomberg News obtained a recording of his comments, some of which were published by Italian news agency AGI yesterday.
The ECB “is more likely to trigger action when they meet,” said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which manages about $25 billion. “Whether it’s comprehensive enough to keep sentiment strong and keep markets rallying is a different issue because in the end there’s not much central banks can do to address the global debt situation.”
The rally in Spain’s two-year notes widened the yield spread to 10-year debt to as much as 356 basis points, or 3.56 percentage points, the most since Bloomberg began collecting the data in 1993. The spread between Italy’s two-year and 10-year debt reached 338 basis points, also a record.
Volatility on Portuguese government debt was the highest in the euro area today, followed by Spain and Italy, according to measures of 10-year bonds, the spread between two- and 10-year securities, and credit default swaps. Portugal’s 10-year yield lost 28 basis points to 8.69 percent, more than twice the average daily move over the past 90 days.
Nickel, sugar and cotton fell more than 2 percent to lead losses in 13 of 24 commodities tracked by the S&P GSCI Index, which slipped 0.4 percent. Soybeans pared gains after climbing as much as 1.9 percent to an all-time high of $17.89 a bushel. Prices have risen 46 percent this year as the worst U.S. drought in 56 years curbed output. Gold for December delivery settled up 0.5 percent at $1,696 an ounce amid speculation that a sluggish global economy will force central bankers to add monetary stimulus, increasing demand for the metal as an inflation hedge.
The MSCI Emerging Markets Index lost 0.6 percent. The Shanghai Composite Index dropped 0.8 percent as Goldman Sachs Group Inc. cut estimates for Chinese earnings and Societe Generale SA lowered its growth forecast for the world’s second- largest economy. India’s Sensex rose 0.3 percent.
China’s manufacturing contracted at the fastest pace since March 2009, a private survey showed, indicating the slowdown in the world’s second-largest economy is deepening.
The purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics had a final reading of 47.6 for August after a preliminary 47.8 provided Aug. 23. The gauge was at 49.3 in July. The dividing line between expansion and contraction is 50.
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