U.S. stocks retreated for a second day as investors awaited fourth-quarter earnings reports, while European shares erased early gains triggered after economic confidence grew more than forecast. The yen and gold advanced.
The Standard & Poor’s 500 Index slipped 0.3 percent to 1,457.15 as of 4 p.m. in New York and the Stoxx Europe 600 Index closed down 0.1 percent, with trading volume 45 percent higher than the three-month average. The yen appreciated 0.8 percent versus the dollar after touching a 2 1/2-year low last week. Sweden’s krona fell after the central bank said the economy is slowing. U.S. Treasuries remained higher after a $32 billion auction. Gold gained for the first time in four days.
Alcoa Inc. started the reporting season for Dow Jones Industrial Average companies after the close of exchanges in New York, with the largest U.S. aluminum producer posting sales that beat analysts’ forecasts amid higher-than-expected prices for the metal. Fourth-quarter profit at companies in the S&P 500 probably increased 2.9 percent, according to analyst estimates compiled by Bloomberg, which would mark the second-slowest quarterly growth since 2009.
“We’re waiting for earnings to come out,” John Manley, who helps oversee about $212 billion as chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. “Valuations are far from excessive. Yet we’ve had a strong rally very quickly. Now the market is adjusting.”
The S&P 500 retreated for a second day after reaching a five-year high last week following a budget compromise in Washington that averted most of the so-called fiscal cliff of spending cuts and tax increases. The index is trading for about 14.8 times its companies’ reported earnings, compared with a five-decade average of about 16.4.
The VIX, as the Chicago Board Options Exchange Volatility Index is know, declined 1.2 percent to 13.62 today, its lowest level since August. The benchmark gauge of U.S. options has retreated for six straight days and slid 39 percent last week for its biggest weekly drop on record.
Alcoa shares closed unchanged in the regular session and climbed 2.3 percent in extended trading after the company reported results. Sales fell to $5.9 billion from $5.99 billion, beating the $5.6 billion average of 11 estimates. Profit excluding a gain on the sale of a power plant and other one-time items was 6 cents a share, matching the average of 20 estimates compiled by Bloomberg.
GameStop Corp., the world’s largest video-game retailer, tumbled 6.3 percent after the company narrowed its full-year same-store sales forecast, citing disappointing holiday results. Yum! Brands Inc., owner of the Taco Bell and KFC chains, slid 4.2 percent after fourth-quarter same-store sales fell more than projected in China after a government probe into one of its former suppliers hurt demand.
Among European stocks, Debenhams Plc sank 7.7 percent after the second-largest U.K. department-store chain cut its goal for annual profit-margin growth as it stepped up discounting. Vodafone Group Plc gained 1.7 percent as the Wall Street Journal reported that Verizon Communications Inc. Chief Executive Officer Lowell McAdam said buying the U.K. company’s stake in their Verizon Wireless joint venture is feasible. TGS Nopec Geophysical ASA rallied 7 percent as the Norwegian offshore surveyor forecast 2012 revenue that exceeded analysts’ estimates.
The Stoxx 600 rose as much as 0.4 percent in early trading before following U.S. stocks lower. A gauge of euro-region executive and consumer sentiment rose to 87 last month, exceeding the 86.3 median of 24 estimates in a Bloomberg survey.
The yen gained against all 16 major peers. Japan’s currency has climbed more than 1 percent against the dollar this week after touching 88.41 on Jan. 4, the weakest level since July 2010. The yen’s 14-day relative strength index against the dollar was below the 30 level that traders view as a signal that an asset’s price has fallen too fast.
Japan’s Finance Minister Taro Aso said the government will use reserves to buy euro-denominated sovereign debt to weaken the yen, while stopping short of signaling direct euro purchases.
Sweden’s krona weakened against all its major peers, declining 0.6 percent against the euro. Minutes from the Riksbank’s meeting last month showed that the central bank considered cutting the benchmark rate by twice as much as it did.
“New information received since the monetary policy meeting in October indicates that the Swedish economy is slowing down more sharply than was assessed then,” minutes of the Dec. 17 meeting of Riksbank policy makers published today said.
Treasuries rose today after getting off to their worst start to a year since 2009, Bank of America Merrill Lynch indexes showed. U.S. government securities handed investors a 0.7 percent loss in 2013 as of yesterday. Benchmark 10-year yields decreased three basis points to 1.87 percent today.
The three-year notes sold in today’s auction drew a yield of 0.385 percent, compared with a forecast of 0.387 percent in a survey of five of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.62, compared with an average of 3.57 for the past 10 sales.
The yield on Ireland’s five-year note fell 11 basis points to 3.22 percent as the nation began selling securities via banks for the first time in three years.
Bonds in Israel and the U.K. were the world’s biggest movers in developed sovereign markets today, according to Bloomberg’s Cumulative Movement Index, which measures changes in 10-year bonds, the spread between two- and 10-year debt and five-year credit default swaps relative to the average daily change in the past 90 days. Israel bonds had a cumulative movement index of 5.1 and Britain’s was 3.1.
Silver, lead and heating oil rallied at least 1 percent to lead gains in 13 of 24 commodities tracked by the S&P GSCI Index, which increased 0.2 percent.
Gold for February delivery climbed 1 percent to $1,662.20 an ounce after falling 2.5 percent since Jan. 3. Oil in New York was little changed near $93 a barrel before Energy Department data on inventories tomorrow.
The MSCI Emerging Markets Index fell 0.6 percent, declining for a third day, as results from Samsung Electronics Co. and HTC Corp. disappointed some investors. South Korea’s Kospi Index slid 0.7 percent and Taiwan’s Taiex lost 0.4 percent. The Shanghai Composite Index lost 0.4 percent and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 2.2 percent, the most in two months. Brazil’s Bovespa plunged 1.3 percent, the most since November, as power producers led declines.