Stocks Retreat With Dollar as Crops Lead Commodity Gains

Photographer: Ralph Orlowski/Bloomberg

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt. Close

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

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Photographer: Ralph Orlowski/Bloomberg

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

U.S. stocks fell, halting the longest rally for the Standard & Poor’s 500 Index since January, as Coca-Cola Co. slid after earnings declined and a Federal Reserve official called for cuts to stimulus. Treasuries were little changed, the dollar weakened and crops rallied.

The S&P 500 fell for the first time in nine sessions, losing 0.4 percent to 1,676.26 in New York after closing at a record yesterday. The Stoxx Europe 600 Index slid 0.7 percent, retreating from a six-week high. The dollar slipped against 15 of 16 major peers, while 10-year Treasury yields were little changed at 2.53 percent. Cocoa, coffee, nickel and soybeans led the S&P GSCI index to a 0.3 percent gain.

U.S. equities extended losses as Fed Bank of Kansas City President Esther George, who has voted against quantitative easing this year, told Fox Business Network that cuts to the central bank’s bond buying are appropriate as the economy picks up steam. Fed Chairman Ben S. Bernanke will speak to Congress tomorrow. In Europe, German investor confidence unexpectedly dropped in July, data from the ZEW Center for European Economic Research showed.

“Hawkish comments from Kansas City Fed President George as to the timing of adjustments to the Fed’s bond purchases are putting modest pressure on the indices,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “Outside of that, earnings are in the early stages and many are waiting for Chairman Bernanke’s testimony to Congress tomorrow for further direction about future Fed policy.”

Earnings Season

Per-share earnings have topped estimates at about 72 percent of the 36 companies in the S&P 500 that have released earnings so far in this reporting season, data compiled by Bloomberg show.

Goldman Sachs Group Inc. (GS), the world’s most profitable securities firm before the financial crisis, slipped 1.7 percent even after earnings beat estimates. Fixed-income, currency and commodity trading revenue was $2.46 billion, down 23 percent from the first quarter. That compared with an estimate of $2.67 billion from Citigroup Inc. (C) analyst Keith Horowitz.

Coca-Cola lost 1.9 percent after its earnings report showed how unseasonable weather and slowing economic growth restrained sales around the globe. Johnson & Johnson was little changed after its earnings more than doubled in the second quarter after it sold its stake in Elan Corp. and the company boosted its profit forecast. Cintas Corp. (CTAS) retreated 1.7 percent after the uniform maker forecast earnings for the current fiscal year that were below estimates.

The U.S. earnings season “seems to have started off quite well, and we need the fundamentals to come through to support where prices have gone over the past year,” said Keith Poore, head of investment strategy at AMP Capital Investors Ltd. in Wellington, which manages more than $130 billion.

Economy Watch

The consumer-price index in the U.S. increased 0.5 percent after a 0.1 percent gain the prior month, Labor Department figures showed today. The median forecast in a Bloomberg survey called for a 0.3 percent rise. The biggest advance in gasoline prices in four months accounted for about two-thirds of the gain in the CPI. The core measure, which excludes food and fuel, rose 0.2 percent, matching the May gain and the survey median.

Another report from the Fed showed output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May. The gain matched the median forecast of 86 economists in a survey. Manufacturing, which makes up 75 percent of total output, increased more than projected.

The Stoxx 600 erased an earlier advance of 0.1 percent as travel, media and telecommunications shares helped lead losses. Telecom Italia SpA (TIT) slid 3.4 percent to a 16-year low in Milan after putting a plan to spin off its fixed-line assets on hold.

German Confidence

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 36.3 from 38.5 in June. That’s the first decline in three months. Economists forecast a gain to 40, according to the median of 37 estimates in a Bloomberg News survey.

The MSCI Emerging Markets Index was little changed after five consecutive daily gains. India’s Sensex Index slid 0.9 percent while the rupee jumped 1 percent, helping to lead gains in developing-nation currencies, after the central bank raised two interest rates. The Shanghai Composite Index added 0.3 percent and Russia’s Micex Index advanced 0.5 percent and Brazil’s Ibovespa increased 0.3 percent.

The dollar weakened 0.8 percent to 99.10 yen. The U.S. currency slid 0.8 percent to $1.3162 per euro.

Australia’s dollar climbed against all 16 of its major peers as investors pared bets the Reserve Bank will cut borrowing costs after the minutes of its most recent meeting were released today.

Cocoa, soybeans, coffee and nickel rose at least 2 percent to lead gains in 17 of the 24 commodities tracked by the S&P GSCI.

Copper climbed 1.2 percent to $6,998 a metric ton, the first gain in three days. West Texas Intermediate crude slipped 0.3 percent to $106 a barrel.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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

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