U.S. Stocks Drop, Brazil Shares Sink; Oil Gains on Egypt

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Photographer: Ralph Orlowski/Bloomberg

A financial trader reacts as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt.

U.S. stocks fell, with the Standard & Poor’s 500 Index erasing gains after failing to hold above its average level from the past 50 days, while Brazil’s shares sank on concern the economy may shrink. Oil rallied and the yen slid.

The S&P 500 fell 0.1 percent to 1,614.08 at 4 p.m. in New York after climbing as much as 0.6 percent in morning trading. Brazil’s Ibovespa sank 4.2 percent, the most since September 2011, as Nomura Holdings Inc. said the economy may slip into recession. The 10-year Treasury yield was little changed at 2.47 percent. The yen depreciated 1 percent to 100.66 per dollar. Oil jumped to a 14-month high, approaching $100 a barrel, on concern unrest in Egypt will threaten supplies.

The S&P 500 reversed its advance after momentarily rising above its 50-day (SPX) moving average near 1,624, a level watched by traders to gauge market momentum. The benchmark gauge also pared gains yesterday after briefly exceeding the technical level. Stocks climbed earlier as factory orders topped estimates and the Federal Reserve’s William Dudley reiterated that the central bank may prolong bond purchases if needed. Investors awaited jobs data tomorrow and on July 5 to gauge the health of the economy and the outlook for Fed stimulus.

“We’re still not out of the water yet,” Jason Cooper, who helps oversee $2.5 billion in South Bend, Indiana, at 1st Source Investment Advisors, said in a phone interview. “It’s going to take some actual data to come in to at least reassure investors that the economy is doing OK and people are getting jobs.”

Market Leaders

Boeing Co., General Electric Co. and Travelers Cos. lost at least 1.6 percent to lead the Dow Jones Industrial Average (INDU) down 42.55 points to 14,932.41.

DaVita HealthCare Partners Inc. tumbled 5.9 percent after the government proposed reducing payments to dialysis-center operators. Ford Motor Co. and Abercrombie & Fitch Co. added at least 2.8 percent amid optimism over June sales. Zynga Inc. jumped 6.5 percent after naming a new chief executive officer.

William Dudley, president of the Federal Reserve Bank of New York, said that while economic growth will probably quicken in 2014, the central bank may prolong bond purchases if the economy turns out weaker than Fed forecasts.

The S&P 500 has dropped 3.3 percent from its May 21 record after Fed Chairman Ben S. Bernanke signaled the central bank could scale back asset purchases if the economy improves in line with forecasts. It still rallied 13 percent in the first half of the year, the best performance since a 17 percent gain in the first six months of 1998.

‘Transition Period’

“We’re in a transition period where the Fed has signaled that they’re beginning to view a possible tapering,” Ernie Cecilia, the chief investment officer who helps oversee about $6.7 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “The determinant is more so on what the economy is going to produce. This transition from liquidity to final demand is marked by higher level of volatility and we’re witnessing it. At the end of the day, it’s fundamentals that drive revenue and earnings.”

Factory orders in the U.S. increased 2.1 percent in May, more than double the pace in April, a government report showed today. Data tomorrow from the ADP Research Institute may indicate American companies added 160,000 jobs in June, before the Labor Department’s monthly payrolls report at the end of the week that is forecast to show an increase of 165,000 positions.

U.S. stock exchanges will close at 1 p.m. New York time tomorrow and bond markets will shut at 2 p.m. American financial markets will be closed on July 4 for the Independence Day holiday.

Earnings Season

Alcoa Inc. will unofficially start the second-quarter earnings season after the market close on July 8, as the biggest U.S. aluminum producer becomes the first company in the Dow to report results. Profits from S&P 500 companies probably grew 2.4 percent from April through June, according to analyst estimates compiled by Bloomberg, down from a projected increase of 6.2 percent at the beginning of the quarter.

The Stoxx Europe 600 Index declined 0.4 percent from the highest level since June 19. Fresenius Medical Care AG slumped 8.7 percent, dragging a gauge of health-care companies lower. The German operator of kidney-dialysis centers plunged the most in more than a decade on a closing basis after the U.S. government’s Health and Human Services Department proposed cutting payments to providers of the treatment from next year.

Dialog Semiconductor Plc jumped 7.6 percent after the maker of chips used in Apple Inc.’s iPhone agreed to buy IWatt Inc. for as much as $345 million. The acquisition enables Dialog to expand into the market for power-management technology.

Brazil Tumble

Brazil led losses in developing nations, sending the MSCI Emerging Markets Index down 1.2 percent. The Ibovespa fell to a four-year low as industrial production shrank more than analysts forecast and Nomura said the nation may enter a recession in the last quarter of 2013 as tighter monetary policy in the U.S. curbs capital flows to Latin America.

OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, extended a four-day plunge to 52 percent after Morgan Stanley cut the stock to the equivalent of sell. Rossi Residencial SA plunged 6.3 percent as homebuilders declined.

Egypt’s EGX 30 Index jumped 4.9 percent, the steepest advance since July 2012, after the military gave President Mohamed Mursi 48 hours to find a solution to the country’s political impasse, following mounting nationwide protests against his rule. The political showdown escalated as hundreds of thousands massed to demand the departure of Mursi. Adding to the turmoil were vows by Mursi’s Islamist supporters to stand firm against what they saw as a threat of a military coup.

China Stocks

The Shanghai Composite Index gained 0.6 percent as China’s overnight money-market rate dropped to a one-month low. The Hang Seng China Enterprises Index of mainland companies slipped 1.2 percent as trading resumed following a holiday yesterday.

Australia’s dollar fell 1.1 percent to 91.39 U.S. cents as the central bank kept its overnight cash-rate target at 2.75 percent as predicted by 25 of 28 economists surveyed by Bloomberg News. The Aussie “remains at a high level” and may “depreciate further over time, which would help to foster a rebalancing of growth,” Governor Glenn Stevens said in a statement today.

The euro weakened 0.7 percent to $1.2969, an almost one-month low. A report showed producer prices in the 17-nation bloc unexpectedly fell in the 12 months through May, buoying speculation the European Central Bank will keep monetary policy accommodative when it meets this week.

Portugal’s 10-year bonds fell for the first time in five days, sending the yield up 33 basis points to 6.72 percent, as the government said Secretary of State for Treasury Maria Luis Albuquerque would replace Vitor Gaspar as finance minister.

Oil Rallies

West Texas Intermediate gained 1.6 percent to a 14-month high of $99.60 a barrel amid concern protest in Egypt will threaten supplies and speculation U.S. stockpiles shrank last week.

Natural gas futures rose for a second day in New York as hotter weather spurred demand for the power-plant fuel. Gas gained as much as 2.4 percent amid forecasts for above-normal temperatures in the West and Northeast through July 16, according to MDA Weather Services. Cooler weather will give way to higher readings in Texas starting next week.

Wheat climbed 0.5 percent, the first advance in nine days. Egypt, the world’s largest importer, bought 180,000 metric tons of the grain in its first tender since February.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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