Stocks, commodities and the euro fell as concern about U.S. corporate profits grew and European finance ministers met to discuss the region’s debt crisis. The yen rose and Chinese shares slid as the World Bank forecast slowing growth in East Asia.
The Standard & Poor’s 500 Index lost 0.3 percent to 1,455.88 at 4 p.m. in New York and the Dow Jones Industrial Average fell from an almost five-year high. The euro weakened against 12 of 16 major peers and the yen gained versus all 16, while the rand dropped to the lowest since April 2009. China’s yuan touched the highest level since 1993, while the Shanghai Composite Index slipped on the first trading day after a week’s holiday. Zinc, gasoline and silver led commodities lower.
Alcoa Inc. unofficially starts the earnings season with its results tomorrow, the fifth anniversary of the record highs in the S&P 500 and Dow. European finance ministers are meeting in Luxembourg to discuss Spain’s finances and closer banking cooperation, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. Growth in developing East Asia will probably slide to an 11-year low of 7.2 percent this year, the World Bank estimates.
“We’re back to dealing with the issues in Europe,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview today. His firm oversees $20 billion. “We’re going back to a period where investors become less enthusiastic as they realize the problems of the world have not gone away.”
Below $600 Billion
Trading of U.S. Treasuries was closed for the Columbus Day holiday, while Canadian markets were shut for Thanksgiving.
Among U.S. stocks, Apple Inc., the largest company, retreated 2.2 percent to $638.17 and fell below $600 billion in market value after rising above that threshold for the first time in August. The shares are down about 9 percent from their record closing level of $702.10 on Sept. 19. Foxconn Technology Group, the assembler of iPhones, stopped production for the second time in as many weeks as workers protested against increased pressure.
The S&P 500 pared last week’s 1.4 percent rally. Earnings at companies in the S&P 500 are projected to fall 1.7 percent in the third quarter in the first decline since 2009, according to analyst forecasts compiled by Bloomberg. Of the 500 companies in the benchmark gauge for U.S. equities, 26 have reported results so far, with profit falling an average 2.1 percent, data compiled by Bloomberg show.
“While recession in the U.S. is not necessarily imminent, earnings are weakening fairly quickly,” Gina Martin Adams, a Wells Fargo & Co. strategist, wrote in a note today. “Formerly strong export and investment sensitive sectors are suffering from economic and policy uncertainty, pressuring index earnings to the brink.”
The companies analysts are most bullish about are the ones whose stock prices are farthest below their highs -- banks. While financial institutions in the S&P 500 climbed 24 percent in 2012 for the biggest rally in nine years, they remain 58 percent below the record of February 2007, according to data compiled by Bloomberg. Signs of a housing recovery prompted Wall Street firms to raise estimates for profit growth to 21 percent for the third quarter and 32 percent in the fourth, the most of 10 industries in the S&P 500.
Economists project U.S. gross domestic product will increase 2.05 percent next year after rising 2.2 percent in 2012, according to the median of estimates compiled by Bloomberg.
Home Depot Inc., Hewlett-Packard Co. and Walt Disney Co. lost more than 1.2 percent to lead the Dow down 26.5 points to 13,583.65. Facebook Inc., operator of the world’s largest social network, dropped 2.4 percent after being downgraded at BTIG LLC. Netflix Inc., the world’s largest video-subscription service, advanced 10 percent after the shares were raised at Morgan Stanley.
The Stoxx 600 fell 1 percent as all 19 industry groups retreated. Cookson Group Plc, a British supplier of materials to the steel and glass industry, plunged 12 percent after predicting its annual performance will be “materially” below its target.
Eurobank Ergasias SA surged 5.1 percent in Athens as National Bank of Greece SA offered to acquire its domestic rival as the nation’s debt crisis forces a wave of mergers. National Bank rallied 5.7 percent.
The euro depreciated 0.9 percent to 101.62 yen and weakened 0.6 percent to $1.2973. Ministers from all 27 nations in the European Union meet tomorrow while Spanish Prime Minister Mariano Rajoy will travel to Paris on Oct. 10 for talks with French President Francois Hollande.
The rand weakened as much as 2.4 percent to 8.9942 per dollar, the lowest level since April 2009, as strikes in South Africa’s mining and transportation industries spread to other sectors of the economy.
The yield on Germany’s 10-year bond fell five basis points to less than 1.48 percent. The nation’s industrial production in August declined 0.5 percent from July, the Economy Ministry in Berlin said today. Economists had forecast a drop of 0.6 percent, according to a Bloomberg News survey.
China’s yuan climbed to 6.2812 per dollar, the strongest level since the nation unified official and market exchange rates at the end of 1993, before closing 0.04 percent lower at 6.2872, according to the China Foreign Exchange Trade System. Today’s high exceeded the central bank’s reference rate by a record 0.98 percent, near to the maximum 1 percent divergence that is permitted.
The Shanghai Composite Index dropped 0.6 percent as data signaling slowing growth outweighed an increase in tourism sales during the so-called Golden Week holiday that ended Oct. 5.
“During the previous crisis back in 2009, China acted as an incredible counterweight to the western difficulties with this huge infrastructure boost,” said Stephen King, chief economist at HSBC Holdings Plc. “We’re not seeing this same kind of boost from China this time around. Everyone exposed to southern Europe is not benefiting from a China boom and that’s really hitting world trade.”
Silver slid 1.6 percent, while gold futures declined 0.3 percent to $1,775.70 an ounce. Futures for gasoline fell 2 percent to $2.8931 a gallon.
Oil in New York slipped 0.6 percent to $89.33 a barrel and reached a a $22.49-a-barrel discount to Brent, the European benchmark. The spread, the widest since Oct. 20, 2011, has widened on signs that supply in the U.S. is exceeding demand.
The premium for California-blend gasoline, or Carbob, fell by more than half after Governor Jerry Brown directed state regulators to let refineries make winter-blend fuel. The California Air Resources Board granted refineries permission yesterday to make an early shift to the winter blend, typically not sold until after Oct. 31. The winter blend is easier to make.
The premium for California-blend gasoline in Los Angeles versus futures on the New York Mercantile Exchange, lost 42.5 cents to 37.5 cents at 1:36 p.m. in New York, according to data compiled by Bloomberg. The same fuel in San Francisco slumped 42.5 cents to 30.5 cents a gallon above futures.