U.S. Stocks Drop, Treasuries Gain as Economic Data Disappoint

Stocks, Euro Rise
Thomas M. Kay of Morgan Securities LLC works on the floor of the New York Stock Exchange. Photographer: Jin Lee/Bloomberg

U.S. stocks fell for a fourth day, the longest slump for the Dow Jones Industrial Average since August, while Treasuries rose as reports showed American consumer confidence trailed estimates and business activity cooled in January. Equities pared early losses as banks rallied.

The Dow slipped 20.81 points to 12,632.91 and the Standard & Poor’s 500 Index fell less than 0.1 percent to 1,312.4 at 4 p.m. in New York, trimming its monthly gain to 4.4 percent. The MSCI All-Country World Index rose 0.3 percent to extend its January advance to 5.7 percent, its best start to a year since 1994. The Dollar Index rose 0.2 percent as the euro fell 0.5 percent to $1.3081. Ten-year Treasury yields fell five basis points to 1.80 percent. Oil erased a 2.5 percent early gain.

Stocks, the euro and commodities retreated from their highs of the day as lower-than-forecast readings in the Conference Board’s confidence index and the Institute for Supply Management-Chicago Inc.’s business barometer cast doubt on the strength of the U.S. economy. Earlier gains were triggered after most countries in Europe agreed to tighter budget controls and Greece made progress on debt talks.

“It’s unsettling,” Peter Sorrentino, a senior fund manager who helps oversee $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “The weakness in the consumer sector adds to fears that, if Europe slips into a recession, that could limit growth in the U.S.”

Losing Streak

The S&P 500’s four-day drop is its longest losing streak since November. The index is still up 19 percent from its 2011 low in October. Losses today were led by energy and industrial companies, while financial shares erased an early drop to help lead gains as Citigroup Inc. and Morgan Stanley increased at least 1.6 percent.

The S&P 500 is up 19 percent from its 2011 low in October. The index’s average level over the past 50 days today rose above its average from the past 200 days after slumping below since August. The pattern, known as a “golden cross,” may signal the rally will continue, according to technical analysts and investors whose decisions are influenced by price charts.

The Conference Board’s confidence index fell to 61.1 from a revised 64.8 reading in the prior month and trailed the most pessimistic projection in a Bloomberg survey of economists as gasoline prices rose and more Americans said jobs were hard to get. The ISM-Chicago’s business barometer declined to 60.2 from 62.2 in December, trailing the median forecast of 63.

Earnings Season

Exxon Mobil Corp., the world’s largest energy company, led declines in the Dow after reporting fourth-quarter sales that trailed estimates as oil and natural-gas production decreased. Alcoa Inc., Merck & Co. and Intel Corp. fell at least 1.2 percent for the next-biggest losses in the 30-stock Dow.

Profits have topped analyst estimates at about two-thirds of the 192 companies in the S&P 500 that released results since Jan. 9, data compiled by Bloomberg show. Earnings-per-share have increased 2.5 percent for the group and sales have risen 7.8 percent.

European stocks rose, capping their best start to a year since 1998. BP Plc and Royal Dutch Shell Plc tracked gains in crude prices. ThyssenKrupp AG added 2.7 percent after selling its stainless steel unit to Outokumpu Oyj. ARM Holdings Plc jumped 2 percent after fourth-quarter revenue topped estimates. European Aeronautic Defence & Space Co. climbed 1.7 percent after UBS AG advised buying the shares.

The Stoxx Europe 600 Index added 0.8 percent and rallied 4 percent this month. The euro strengthened 0.9 percent in January, its first monthly increase since October.

European Union leaders, meeting in Brussels yesterday, completed a fiscal-discipline treaty that speeds sanctions on high-deficit states. Greek Prime Minister Lucas Papademos said he’s “strongly committed” to reaching a debt-swap pact with bondholders.

European Bonds

The German 10-year bund yield fell less than one basis point, a fifth straight decline, while the yield on the Greek 10-year bond yield jumped 28 basis points to 34.31 percent. The two-year Belgian note yield declined three basis points, dropping for the fifth consecutive day, after the government sold 2.58 billion euros of treasury bills.

The Portuguese 10-year bond yield dropped 99 basis points to 16.40 percent after reaching a euro-era record yesterday, with the equivalent maturity Italian yield declining 14 basis points to 5.95 percent.

Emerging Markets

The MSCI Emerging Markets Index gained 1.2 percent, capping its best January since 2001. The index rose 11 percent this month after falling 20 percent in 2011. The BSE India Sensitive Index, or Sensex, climbed 2 percent. Benchmark indexes in Russia and Taiwan added more than 1 percent. In Taiwan, global funds bought $1.7 billion more stocks than they sold in January, the most in three months, exchange data showed.

Japan’s factory production rose 4 percent in December as manufacturers made up for disruptions caused by Thailand’s worst floods in 70 years, according to a trade ministry report today. The median estimate of 30 economists surveyed by Bloomberg was for a 3 percent gain.

The S&P GSCI Index of commodities slipped 0.1 percent after rallying 1.6 percent earlier. Oil erased gains and fell 0.3 percent at $98.48 a barrel after surging as much as 2.5 percent.

Gold futures rose 0.3 percent to $1,740.40 an ounce and surged 11 percent this month, capping the biggest January gain since 1983. Silver climbed 19 percent in January, also the best start to a year in almost three decades.

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