U.S. stocks and Treasuries fell with commodities while the dollar gained as minutes of the Federal Reserve’s July meeting showed officials supported reducing monetary stimulus this year if the economy improves.
The Standard & Poor’s 500 Index fell 0.6 percent to 1,642.80 at 4 p.m. in New York. The Dow Jones Industrial Average (INDU) slumped for the sixth straight day, the longest streak in more than a year. Thirty-year Treasury yields jumped six basis points to 3.92 percent, a two-year high. The S&P GSCI gauge of 24 commodities dropped 0.5 percent. The Bloomberg U.S. Dollar Index climbed 0.6 percent. The MSCI Emerging Markets Index tumbled 1.1 percent for a fifth straight decline, with Turkish stocks falling the most as the lira plummeted.
Fed officials were “comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves, with a few saying tapering might be needed soon, minutes of their last meeting show. The Federal Open Market Committee will probably reduce its $85 billion in monthly purchases at its Sept. 17-18 meeting, according to 65 percent of 48 economists in an Aug. 9-13 Bloomberg survey.
“The Fed minutes continue to show this clear uncertainty as to when the monetary tightening will begin,” Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, said in a phone interview. His firm oversees $170 billion. “It will be a seminal moment when they move from the easing they’ve been in for years towards some incremental tightening steps. The minutes are quite clear in the sense that the Fed doesn’t know that we are there yet where the process can begin.”
Three rounds of bond purchases by the U.S. central bank, coupled with improving earnings and economic growth, helped propel the S&P 500 (SPX) up more than 150 percent from its bear-market low in 2009. Speculation about the Fed’s bond purchases has whipsawed stocks since May, when Bernanke first indicated policy makers could begin reducing the stimulus this year if the job market continues to improve.
The benchmark index tumbled 5.8 percent from a record high on May 21 through June 24. It then rebounded 8.7 percent, reaching its latest closing record of 1,709.67 on Aug. 2. The S&P 500 has slid 3.9 percent since then amid growing concern the Fed will start reducing its asset purchases this year as data showed the economy recovering. The yield on benchmark 10-year Treasury notes has soared, reaching 2.90 percent on Aug. 19 for the highest level since July 2011.
The S&P 500 fluctuated after the Fed released its minutes at 2 p.m. in Washington today, with the gauge at one point erasing losses of as much as 0.8 percent. It’s now trading at the lowest level since July 8, while the Dow has dropped to an almost two-month low.
At the conclusion of its two-day meeting in July, the Fed said that while economic growth should pick up from its recent pace, persistently low inflation could hamper the recovery. It repeated a pledge to hold the target interest rate near zero as long as the jobless rate remains above 6.5 percent and the outlook for inflation over one to two years doesn’t exceed 2.5 percent.
“Everybody is edgy right now,” Mark Lehmann, president of JMP Securities LLC in San Francisco, said in a phone interview. “People are not convinced about what to do so you’re susceptible” to big intraday market swings like today, he said.
Data tomorrow is expected to show that initial jobless claims rose last week, according to estimates compiled by Bloomberg. A report today showed that sales of previously owned U.S. homes climbed more than forecast in July to the fastest pace since November 2009 as more buyers entered the market before further increases in mortgage rates.
Among stocks moving today, Target Corp. slid 3.6 percent after the discount retailer’s second-quarter profit fell. Staples Inc. plunged 15 percent after earnings missed estimates and the office-supplies chain cut its earnings forecast. Lowe’s (LOW) Cos. jumped 3.9 percent as earnings topped estimates and the company raised its full-year profit forecast.
Corporate earnings have helped the S&P 500 rally 15 percent this year. Of the 478 companies in the S&P 500 that have reported results this period, 72 percent have posted profit that surpassed estimates, data compiled by Bloomberg show.
The Stoxx 600 capped a third day of declines, the longest losing streak in almost two months. Heineken NV slid 4 percent as the world’s third-biggest brewer said poor spring weather in Europe led to weak second-quarter revenue. Veolia Environnement SA, Europe’s biggest water company, and Standard Life Plc, Scotland’s largest insurer, advanced as analysts upgraded the shares.
Treasury 10-year note yields gained seven basis point to 2.89 percent, trading near the highest level in two years. Yields on 10-year U.K., French and German bonds rose more than three basis points.
The dollar advanced against 15 of its 16 major peers. The U.S. currency climbed 2 percent versus the Norwegian krone and 1.5 percent against the New Zealand currency. The euro weakened 0.5 percent to $1.3357 and the yen dropped 0.5 percent to 97.76 per dollar.
West Texas Intermediate oil slipped 1.2 percent to $103.85 a barrel, to the lowest level in almost two weeks. Gold slipped 0.2 percent to settle at $1,370.10 an ounce. The precious metal jumped 70 percent from the end of December 2008 to June 2011 as the Fed bought more than $2 trillion in bonds to bolster the economy. Copper slipped 0.9 percent.
Japan’s Topix fell for a second day. Tokyo Electric Power Co. slumped 9.3 percent. The country’s nuclear watchdog raised the severity ranking of the company’s leak of radioactive water from a tank at the Fukushima nuclear plant.
The MSCI Emerging Markets Index extended its five-day slump to 4.8 percent. India’s Sensex lost 1.9 percent, sinking 7.6 percent in four days, as the rupee dropped to a record low. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 0.5 percent and gauges in Hungary, Thailand and South Korea slipped at least 1 percent.
In Turkey, the Borsa Istanbul National 100 index slumped 3.5 percent, the lowest level since October 2012 and tumbling the most in dollar terms among 94 indexes tracked by Bloomberg. The lira weakened 1.1 percent to 1.9707 a dollar as the central bank left a key rate unchanged yesterday, spurring bets policy makers won’t act aggressively enough to support the currency.
The Jakarta Composite Index rebounded 1 percent after valuations dropped to a 14-month low and the nation’s biggest pension fund said it’s buying. The rupiah slipped 2 percent against the dollar.
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