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U.S. Stocks Drop as Oil, Silver Retreat; Dollar Index Gains

Updated on
Al-Qaeda leader Osama bin Laden
A file photograph from May 26, 1998 shows Al-Qaeda leader Osama bin Laden. Source: Getty Images

U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from an almost three-year high, as declines in commodity producers overshadowed the killing of Osama bin Laden. Silver sank the most since January as CME Group Inc. raised the amount of cash needed for speculative positions.

The S&P 500 slipped 0.2 percent to 1,361.22 at 4 p.m. in New York, reversing an early advance. The Stoxx Europe 600 Index climbed for an eighth day. The Dollar Index rose 0.1 percent to 73.038 to snap a nine-day slump, its longest losing streak since 2007. Oil retreated from a 31-month high, while silver futures plunged 5.2 percent to settle at $46.084 an ounce after touching a 31-year high last week. Ten-year Treasury yields lost one basis point to 3.28 percent, near an almost six-week low.

Producers of energy and raw materials led declines among industry groups in the S&P 500. Bin Laden, who used a family inheritance to build the terrorist network that killed almost 3,000 people in the Sept. 11, 2001 attacks in New York and Washington, was killed in a U.S. operation in Pakistan, President Barack Obama said in a televised address last night.

“The killing of Osama bin Laden is not a material event for the stock market,” said Andrew Ross, partner and global equity trader at First New York Securities LLC, a New York-based proprietary trading firm that bets on stocks, commodities and derivatives. “It’s a great day for the country, but the market impact should prove to be limited,” he said, adding that concern may shift to “some sort of violent response by al-Qaeda.”

Earnings, Takeovers

The S&P 500 fell for the first time in five days after last week’s 2 percent rally, which was triggered after companies such as Caterpillar Inc. and Goodyear Tire & Rubber Co. reported profit that topped analyst estimates.

Earnings-per-share beat analyst projections at three-quarters of the 302 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg.

Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. lost 1.2 percent each to pace losses in commodity producers today.

Takeovers and higher-than-estimated growth in manufacturing helped propel the market’s early advance.

Shares of Cephalon Inc. rallied 4 percent after Teva Pharmaceutical Industries Ltd. announced plans to buy the drugmaker for $6.8 billion, while International Coal Group Inc. surged 31 percent after Arch Coal Inc. bid $3.4 billion in a takeover offer. About $823 billion in takeover deals have been announced globally so far in 2011, a 25 percent increase from the same period in 2010, according to data compiled by Bloomberg.

Manufacturing Growth

The Institute for Supply Management’s manufacturing index fell to 60.4 in April from 61.2 a month earlier. Figures greater than 50 signal expansion. The median forecast of 78 economists surveyed by Bloomberg News was 59.5. Estimates ranged from 57.5 to 62.

Bin Laden was killed by U.S. operatives after a firefight at a compound in Pakistan, Obama said. The news comes almost 10 years after the Sept. 11 attacks on the World Trade Center in New York and the Pentagon in Virginia just outside of Washington. The KSE 100 Index, Pakistan’s benchmark stock gauge, slipped 0.2 percent after rising 0.6 percent earlier.

“This is a victory for the U.S., just less of one that might have been the case a few years ago,” Bob Doll, New York-based chief equity strategist at BlackRock Inc., which oversees $3.65 trillion as the world’s biggest money manager, said in an e-mail to Bloomberg News. “Many bin Laden lieutenants have risen in the ranks. So while more than a symbolic victory, this does not kill al-Qaeda.”

2011 Rally

The S&P 500 has rallied about 8.2 percent in 2011 as takeovers, higher-than-estimated earnings and economic reports bolstered investors’ confidence. The S&P 500 Total Return Index, which measures the gauge’s performance including reinvested dividends, rallied for an eighth straight month in April to match its longest streak of gains since 1995.

“My biggest concern about the stock market is the rising optimism, which is usually indicative of a peak,” said Byron Wien, the New York-based vice chairman of Blackstone Advisory Partners, in an interview on April 28. “We’re not there yet, but it’s brewing.”

The 0.1 percent gain in the Stoxx Europe 600 pushed it to a two-month high as the regional benchmark rose for an eighth straight day, its longest winning streak in 10 months. Grifols SA surged 5.3 percent as the Spanish maker of blood-plasma products won tentative U.S. antitrust approval to buy Talecris Biotherapeutics Holdings Corp. for $4 billion. Danisco A/S rose 4.3 percent after DuPont Co. raised its bid for the Danish maker of ingredients and enzymes.

Asian, Emerging Market Shares

U.K. equity markets were closed for a holiday today, along with those in China, Hong Kong and Singapore. The MSCI Asia Pacific Index added 1 percent to its highest closing level since June 2008, while the Nikkei 225 Stock Average gained 1.6 percent to close above 10,000 for the first time since March 11, the day Japan was struck by its largest earthquake and subsequent tsunami. Warren Buffett said Berkshire Hathaway Inc. would be “delighted” to invest in Japan and elsewhere in Asia.

The MSCI Emerging Markets Index climbed 0.2 percent and closed at the highest level since June 2008. South Korea’s Kospi index jumped 1.7 percent to a record after government data showed the nation’s exports rose almost 27 percent from a year earlier to a record $49.77 billion, increasing pressure on the central bank to boost borrowing costs next week

Dollar Index Rebounds

The Dollar Index, which tracks the currency against those of six trading partners, rebounded from the lowest level since July 2008. The South Korean won rose 0.2 percent against its U.S. counterpart and touched the highest level since August 2008.

The euro rose 0.2 percent versus the dollar and yen after a gauge of manufacturing in the 17-nation currency region climbed to 58 from 57.5 in March, London-based Markit Economics said in a report, fueled by higher German and French output. The reading was above an initial estimate on April 19.

Silver for July delivery pared losses after dropping as much as 13 percent to $42.20 an ounce. The CME increased the so-called initial margin by 13 percent to $14,513 per contract from $12,825 after the close of business on Friday. Margins were $4,250 a year ago.

Oil for June delivery fell as much as 2.7 percent to $110.82 a barrel before erasing losses and settling down 0.4 percent at $113.52 in New York.

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