U.S. Stocks Retreat While Euro Weakens on Draghi Comments

U.S. stocks fell following a two-day gain amid disappointing earnings and economic data while the euro sank after European Central Bank President Mario Draghi said the currency’s strength could hamper the economic recovery. European shares erased early gains. Treasuries rose.

The Standard & Poor’s 500 Index, which last week reached a five-year high, slipped 0.2 percent to close at 1,509.39 at 4 p.m. in New York. The Stoxx Europe 600 Index closed down 0.2 percent after earlier rising 0.6 percent. The euro weakened 0.9 percent to $1.3398 after touching a 14-month high last week. Ten-year Treasury yields lost one basis point to 1.96 percent. The pound strengthened as the future central bank chief discussed exiting unconventional policies. Natural gas led commodities lower.

U.S. worker productivity fell more than projected in the fourth quarter as the economy shrank, pushing labor expenses up and showing companies are approaching the limit of how much efficiency they can wring from employees. Jobless claims decreased less than economists estimated last week. Draghi told reporters growth risk continues to be on the “downside,” accommodative ECB policy will support the economy and the recent strength of the euro creates risks that inflation will slow.

Photographer: Akio Kon/Bloomberg

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Japanese ten-thousand yen banknotes are arranged for a photograph.

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Photographer: Akio Kon/Bloomberg

Japanese ten-thousand yen banknotes are arranged for a photograph.

“This is a week that’s more overseas-focused,” John Canally, investment strategist at Boston-based LPL Financial Corp., which has $373 billion in advisory and brokerage assets, said in a telephone interview. “Markets are pinned up at the top of this range, close to all-time highs. We’re not so overbought anymore, so they’re waiting for the next catalyst to push it. There isn’t enough of one today.”

Approaching Record

The S&P 500 has rallied almost 6 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The benchmark equity gauge is about 3.7 percent below its record high reached in October 2007 after more than doubling since bottoming in March 2009.

Draghi said an economic recovery should begin later this year as an absence of inflation risks allows the ECB to maintain record-low interest rates. The euro weakened against 15 of 16 major peers.

“The exchange rate is not a policy target, but it is important for growth and price stability,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark rate at a record low of 0.75 percent. “We want to see if the appreciation is sustained, and if it alters our assessment of the risks to price stability.”

Market Movers

Indexes of commodity, financial and and telephone companies lost at least 0.4 percent to lead declines in eight of the 10 main industry groups in the S&P 500.

Akamai Technologies Inc. tumbled 15 percent after its quarterly revenue and forecast missed estimates amid signs of softening demand for the company’s services, which help customers such as news sites and Web retailers speed up their online offerings. Scripps Networks Interactive, owner of television stations and Web sites, slid 3.7 percent after earnings and revenue trailed analysts’ estimates.

Apple Inc. advanced 3 percent after saying it is in “active discussions” about returning more cash to shareholders. Greenlight Capital Inc. sued to try to block Apple Inc. from adopting a measure at its Feb. 27 shareholder meeting that would amend the company’s charter to eliminate preferred stock. The company said it will evaluate Greenlight’s proposal.

In economic reports, worker productivity, the measure of employee output per hour, decreased at a 2 percent annual rate, the worst performance in almost two years, after a 3.2 percent gain in the prior three months, a Labor Department report showed. The median forecast in a Bloomberg survey of 63 economists called for a 1.4 percent drop. Expenses per worker increased at a 4.5 percent rate, more than estimated.

Economic Data

Claims for U.S. unemployment insurance payments fell 5,000 to 366,000 in the week ended Feb. 2, Labor Department figures showed today. Economists forecast 360,000 claims, according to the median of 53 estimates in a Bloomberg survey.

About two stocks fell for each that rose in the Stoxx 600. Sanofi slid 4 percent as the French drugmaker forecast that profit may drop as much as 5 percent this year because of competition to a blood-thinning drug from generic medicines. later this year amid a continued accommodative policy.

Vodafone Group Plc contributed the most to gains by a gauge of telecommunications shares after reiterating its forecast for the year through March. Banca Monte dei Paschi di Siena SpA advanced for a third day. DNB ASA climbed to its highest price since June 2011 after increasing its dividend.

Pound Strengthens

The British pound strengthened against 15 of 16 major peers, reaching $1.5712 and 1.1728 euros. Bank of England Governor-designate Mark Carney said in written evidence to a parliamentary committee that “the bank will need to design, implement and ultimately exit from unconventional monetary policy measure in a manner that reinforces public confidence.” The Bank of England kept its benchmark rate unchanged at 0.5 percent today.

Natural gas futures fell for the first time this week, losing 3.9 percent to $3.285 per million British thermal units, after a government report showed that U.S stockpiles declined by less than forecast last week. Silver, gasoline, corn and coffee also dropped at least 0.8 percent to lead declines in 18 of 24 commodities tracked by the S&P GSCI Index, sending the gauge down 0.3 percent.

Oil fell to the lowest level in two weeks, dropping 0.8 percent to $95.83 a barrel.

Emerging Markets

The MSCI Emerging Markets Index of stocks lost 0.4 percent, declining for a fourth day. India’s Sensex gauge slipped 0.3 percent after the government forecast the weakest economic growth in a decade. Brazil’s Bovespa index tumbled 1 percent and Russia’s Micex Index fell 0.3 percent.

The Shanghai Composite Index slid 0.7 percent. The gauge, which entered a bull market last month, will retreat about 8 percent before resuming gains as the surge in Chinese stocks has exhausted buyers, according to Tom DeMark, the creator of indicators to show turning points in securities.

Brazil’s real rallied 1 percent to an eight-month high against the dollar as a central bank board member said inflation requires attention, spurring speculation that policy makers will let the currency strengthen to contain prices.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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