Stocks Erase Loss on Apple Rally as Treasuries Decline

S&P 500 Futures Gain Before Earnings as Yen Slips on Exports
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg

U.S. stocks erased losses as Apple Inc. led a rally in technology shares. Treasuries fell as a tightening presidential race made investors reluctant to speculate on the economy’s prospects.

The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,433.81 at 4 p.m. in New York after tumbling as much as 0.8 percent. Apple rallied 4 percent for its biggest gain since May. Yields on 10-year Treasury notes added five basis points to 1.81 percent. Oil, natural gas, lead, nickel and zinc tumbled at least 1.5 percent to lead losses in commodities. S&P 500 futures added 0.1 percent at 6:21 p.m. after Yahoo! Inc. reported profit and sales that beat estimates.

Computer and software providers rose the most among 10 groups in the S&P 500, led by Apple. The Cupertino, California-based company will announce a new, smaller version of its iPad tomorrow, according to two people with direct knowledge of the matter who asked not to be identified because details haven’t been made public. Peabody Energy Corp. and Caterpillar Inc. helped lead gains in the S&P 500 after reporting results, while General Electric Co. lost more than 1.5 percent for a second day after posting sales last week that trailed estimates.

“It really comes down to earnings at this point,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. He spoke in a telephone interview. “We’ve seen many companies beating earnings estimates. Yet investors are keeping an eye on their ability to grow revenue.”

Market Movers

The S&P 500 ended last week up 0.3 percent as a three-day rally was almost wiped out by a tumble on the final session. The index dropped 1.7 percent on Oct. 19, the most since June, as companies from General Electric to McDonald’s Corp. and Microsoft Corp. posted results below estimates.

Per-share profits have topped estimates at 69 percent of the 123 companies in the S&P 500 that have released earnings, according to data compiled by Bloomberg. Earnings have increased about 0.9 percent for the group amid a 1.9 percent gain in sales.

SunTrust Banks Inc., the eighth-largest U.S. lender, tumbled 3.4 percent after profit missed analysts’ estimates. VF Corp. declined as sales trailed the average forecast and the clothing company said the European market remains challenging.

Peabody Energy, the largest U.S. coal producer by volume, surged 12 percent after reporting third-quarter earnings that beat analysts’ estimates after selling more coal from its mines in Australia and Wyoming’s Powder River Basin.

Earnings Season

Caterpillar, the world’s largest maker of construction and mining equipment, climbed 1.5 percent after reporting earnings that beat analysts’ estimates, while also predicting sales growth for next year that is the slowest in four years as the global economy decelerates.

Monster Beverage Corp. tumbled 14 percent, the most in more than four years, as its drinks were cited in five deaths in the past year, according to incident reports that doctors and companies submit to the Food and Drug Administration. The agency said the incidents, which are voluntarily reported, are considered to be allegations and no conclusion is drawn until a full investigation is completed. Evan Pondel, a spokesman for Monster, said the company is unaware of any fatality that has been caused by its drinks.

Yahoo! Inc. rose 4.2 percent after the close of regular trading. The biggest U.S. Web portal’s results beat estimates as Chief Executive Officer Marissa Mayer benefited from advertising demand and cost cuts during her first three months on the job.

U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009.

Beating Treasuries

The S&P 500 rallied 14 percent in 2012 through last week, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P 500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the index gained another 93 percent in the next 2 1/2 years.

Treasuries extended last week’s decline as President Barack Obama and Republican challenger Mitt Romney were tied at 47 percent in a national NBC News/Wall Street Journal poll of likely voters before a final televised debate tonight.

“They won’t commit too much capital going into the elections,” said Jim Vogel, head of agency-debt research at FTN Financial in Memphis, Tennessee. The market will “judge” from tonight’s debate, he added.

Two-year and 30-year Treasuries also retreated, sending yields up one basis point to 0.31 percent and three basis points to 2.97 percent, respectively. The Treasury is scheduled to sell $99 billion of two-, five- and seven-year notes this week starting tomorrow.

European Stocks

The Stoxx Europe 600 Index slipped 0.4 percent after gaining as much as 0.3 percent. Royal Philips Electronics NV climbed 5.8 percent as the largest lighting company reported third-quarter profit that beat estimates. Nexans SA sank 6.6 percent, the most in six months, after the world’s second-biggest cable maker said its second-half margin won’t rebound as much as expected in July because of a slowdown in Europe, Brazil and Australia.

The euro gained against 14 of 16 major peers after voters backed Spain’s Prime Minister Mariano Rajoy in a regional election. The currency climbed 0.3 percent to $1.3058. After the close of the U.S. markets, Moody’s Investors Service downgraded five Spanish regions, while confirming ratings on five others.

Oil Slumps

Oil in New York retreated 1.5 percent to a two-week low of $88.73 a barrel after gaining as much as 0.8 percent earlier. The Organization of Petroleum Exporting Countries governors meet in Vienna today and tomorrow to select a new secretary-general for the first time in six years, with four countries vying for the position.

Natural gas led losses in 14 of 24 commodities tracked by the S&P GSCI Index. Wheat climbed for a fourth day.

The yen weakened 0.7 percent against the dollar and 1 percent versus the euro. Its eight-day drop against the dollar is the longest run of declines in seven years. Japan’s exports fell the most since the earthquake in 2011, Finance Ministry data showed.

‘Additional Stimulus’

“The market is acting with an assumption that there will be additional stimulus by the Bank of Japan,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “The economies in Europe and Japan look bleaker compared with the U.S.”

The MSCI Emerging Markets Index was little changed, after falling as much as 0.5 percent earlier. Russia’s Micex added 0.8 percent as OAO Rosneft agreed to buy TNK-BP, a 50-50 venture between BP Plc and a group of billionaires, for $54.8 billion in the third-biggest oil acquisition ever. Rosneft rallied 2.6 percent. BP slipped 1.5 percent.

India’s Sensex Index jumped 0.6 percent after better-than-estimated results from Tata Consultancy and Bajaj Auto Ltd. The Shanghai Composite Index gained 0.2 percent on speculation China’s government will take steps to boost equities before a leadership transition next month.

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