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U.S. Stocks Decline After 2-Day Rally as Energy Slumps

Aug. 12 (Bloomberg) -- Citigroup Chief U.S. Equity Strategist Tobias Levkovich discusses the markets on “Bloomberg Surveillance.” (Source: Bloomberg)

U.S. stocks declined, after the Standard & Poor’s 500 Index produced its biggest two-day gain since April, as investors watched geopolitical developments and energy shares sank after Brent crude fell to a 13-month low.

Nuance Communications (NUAN) Inc. tumbled 9 percent after posting third-quarter revenue that missed analysts’ estimates. Consol Energy Inc. slipped 2.4 percent to pace losses among energy shares. Intercept Pharmaceuticals Inc. (ICPT) soared 17 percent after a clinical trial met its primary goal. Newmont Mining Corp. jumped 2 percent to the highest since November after an eighth day of gains.

The S&P 500 fell 0.2 percent to 1,933.75 at 4 p.m. in New York. The Dow Jones Industrial Average slipped 9.44 points, or 0.1 percent, to 16,560.54. The Russell 2000 Index of small stocks retreated 0.8 percent. About 4.9 billion shares changed hands on U.S. exchanges, the slowest day in a month.

“We’re in a zone of ambivalence with investors maintaining a cautious bias,” Terry Sandven, chief equity strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $124 billion, said by phone. “Equities appear to be navigating the dog days of summer with markets being driven more by geopolitical events than economic and company fundamentals.”

The S&P 500 (SPX) climbed 1.4 percent in the previous two trading days amid speculation that tension in Ukraine would lessen. The S&P 500 had fallen as much as 3.9 percent from its record of 1,987.98 on July 24 on concern that conflicts from Iraq to Israel and Ukraine could slow global economic growth.

Geopolitical Concerns

Data today from Germany reignited those concerns, after investor confidence reported by the ZEW Center dropped for an eighth month as the crisis in Ukraine and a sluggish euro-area recovery damped the outlook for Europe’s largest economy.

A Russian humanitarian mission was headed toward eastern Ukraine after the U.S. warned President Vladimir Putin not to use aid as a cover to send in troops. Ukraine said it won’t let the convoy enter in its current form because it argues the mission doesn’t adhere to international rules.

Equities pared declines after Russia’s Foreign Minister Sergei Lavrov called on Germany to assist with the aid mission. Lavrov spoke by phone with German Foreign Minister Frank-Walter Steinmeier today, the Russian Foreign Ministry website said.

In the Middle East, wide gaps remain between Israel and the Palestinians in reaching a long-term deal on the Gaza Strip, an Israeli official said, as Hamas warned there would be no more truces beyond the one due to end at midnight tomorrow.

Iraq’s Prime Minister Nouri al-Maliki chaired a meeting of military officers in the latest sign that he won’t hand power to designated successor Haidar al-Abadi.

Not Immune

“We have some bad news on German investor confidence, and bad news from the euro zone in the long term impact the U.S.,” Walter Todd, who oversees more than $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said in a phone interview. “The economic data from the U.S. is very good, but if the economic situation in Europe continues to deteriorate, we’re not going be immune from that forever.”

Recent reports have shown U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.

A government report today showed job openings rose in June to the highest level in more than 13 years, firming up the U.S. labor market picture for the second half of the year. The figures are among those on Federal Reserve Chair Janet Yellen’s labor-market “dashboard,” which she uses to help guide monetary policy.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index (VIX), which usually moves in the opposite direction to the S&P 500, slid 0.7 percent to 14.13 today.

Seven of the 10 main groups in the S&P 500 declined, with energy companies dropping 0.7 percent to lead the slide as Brent crude settled at the lowest level since July 2013. The International Energy Agency said a supply glut was shielding the market against threats in the Middle East.

Consol Energy lost 2.4 percent, while Kinder Morgan Inc. fell 1.6 percent after yesterday rallying 9 percent. Pioneer Natural Resources Co. slid 2 percent.

Nuance Communications dropped 9 percent to $16.47 after the maker of speech-recognition software reported adjusted third-quarter revenue of $486.8 million, missing the average analyst projection of $498.5 million.

Intercept Pharmaceuticals surged 17 percent to $276.52. The company said a treatment based on bile acid met the primary goal in a test of 219 patients with non-alcoholic fatty liver disease.

Newmont Mining rose 2 percent to $27.06 for the biggest gain in the S&P 500 and its highest level since November 2013. The gold miner’s eight-day rally is its longest in three years.

To contact the reporters on this story: Elena Popina in New York at epopina@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

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

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