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S&P 500 Drops as Apple Loss Offsets Dell Gain; Crops Rise

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Jan. 14 (Bloomberg) -- The Standard & Poor’s 500 Index slipped from near a five-year high as Apple Inc. slumped amid concern about iPhone sales, overshadowing a rally in Dell Inc. Crops led commodity gains and Treasuries rose a second day.

The S&P 500 lost less than 0.1 percent to 1,470.68 at 4 p.m. in New York after falling as much as 0.4 percent earlier. Dell surged 13 percent, the most in four years, after the computer maker was said to be in buyout talks with private-equity firms. The yen was was down 0.6 percent at 119.70 versus the euro and weakened to 120 for the first time in 20 months. Treasury 10-year yields lost two basis points to 1.85 percent. Wheat, corn and soybeans rose at least 1.6 percent on signs of tighter supplies in the U.S.

Apple tumbled 3.6 percent and was the biggest drag on the S&P 500 after the Nikkei newswire reported that the company scaled back production plans for the iPhone because sales trailed expectations. Goldman Sachs Group Inc., EBay Inc. and General Electric Co. are among S&P 500 companies due to report earnings this week.

“Apple is the story for the market,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion, said in a telephone interview. “It brings fear that if Apple’s doing something, the other companies and industries would be doing the same. That makes it even more important for investors to watch corporate guidance or CEOs’ expectations.”

Technology Shares

Apple led technology shares in the S&P 500 down 0.7 percent as a group. Apple cut its original target to order 65 million iPhone 5 displays this quarter by about half, Nikkei said, citing an unidentified senior executive at a component maker it didn’t name. Apple cut production by about 30 percent last month, which may be the result of inventory rebalancing or lower consumer demand, according to Steven Milunovich, an analyst at UBS AG.

Dell posted the biggest gain in the S&P 500. The personal-computer maker, which lost almost a third of its value last year, is discussing going private with at least two firms, said a person familiar with the matter, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not line up the needed financing or resolve how to exit the investment in the future, two people with knowledge of the matter said.

Market Movers

Hewlett-Packard Co. rallied 4.9 percent to lead the Dow Jones Industrial Average higher after Gartner Inc. said it retook the spot as the top personal-computer maker, with the shares extending gains following Bloomberg News’s report on Dell. Sprint Nextel Corp. dropped 3.9 percent after the wireless carrier was cut at JPMorgan Chase & Co.

Of the 28 S&P 500 companies that have posted quarterly earnings, 79 percent exceeded analysts’ estimates and 68 percent reported a profit increase, according to data compiled by Bloomberg. Fourth-quarter profit at S&P 500 companies probably grew 2.5 percent, according to analysts’ estimates. That would be the second-slowest quarterly growth since 2009, the data show.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 1.2 percent to 13.52. The gauge ended last week at the lowest level since 2007.

Volatility will deter investors from moving into stocks from bonds in 2013 even as dividend returns top fixed-income yields, according to Goldman Sachs’s U.S. equity strategist. The forecast is at odds with Goldman Sachs Asset Management Chairman Jim O’Neill’s comment this year that funds may be set for a “great rotation” into equities.

‘Drawdown Risk’

“It’s the drawdown risk that is inhibiting investors from reducing bond holdings and increasing equity holdings,” David Kostin said at a presentation in London today. “You need to have more stable markets. I do not anticipate flows into equities from bonds. It should happen, it won’t happen this year.”

Tobias Levkovich, the most-accurate Wall Street strategist on the S&P 500 in 2012, said earnings growth and the return of investors to equities will extend the U.S. bull market into a fifth year.

“We’re looking for another double-digit gain this year,” Levkovich, chief U.S. equity strategist at Citigroup Inc., said in a Bloomberg Television interview on “Surveillance” with Tom Keene, Scarlet Fu and Sara Eisen. “You are supposed to buy when the idea of buying gets you a little sick to your stomach.”

In Canada, Aurizon Mines Ltd. soared 33 percent as Alamos Gold Inc. offered C$780 million for the company. Alamos retreated 12 percent. Uranium One Inc. jumped 15 percent as Russian state-owned JSC Atomredmetzoloto planned to buy the rest of the company it doesn’t already own for C$1.3 billion.

‘Bold Policy Leader’

The yen recovered some losses after weakening against most major peers earlier. It was down 0.3 percent at 89.47 per dollar after sliding more than 0.5 percent 89.67, the weakest level since June 2010. Japan’s financial markets were shut today.

Prime Minister Shinzo Abe said yesterday he is seeking a “bold policy leader” as the next central bank chief. China can expand investment quotas in the country’s financial markets by 10 times, said China Securities Regulatory Commission Chairman Guo Shuqing.

“The yen weakness is likely to persist for a while as the impression in the market is that the new government is very aggressive on growth,” said Michael Quach, a global strategist in London at Smith & Williamson Investment Management, which oversees the equivalent of $19 billion. “That would probably mean more stimulus and easier monetary policy. This results in significant weakness of the yen.”

Bernanke Speaks

The U.S. currency decreased 0.3 percent to $1.3387 per euro after slipping to $1.3404, a level last seen in February.

After markets closed in New York, Federal Reserve Chairman Ben S. Bernanke said he isn’t aware of any new stimulus tool for the central bank to use to try to boost growth.

“As far as I’m aware, there’s no completely new method that we haven’t” already tapped, Bernanke said today in Ann Arbor, Michigan.

The Fed lowered its benchmark interest rate to near zero in December 2008. Since doing so, its two main approaches for further easing have been communications about the outlook for interest rates and asset-purchase programs, both of which the central bank has used, Bernanke said.

Bernanke’s speech comes before reports this week that may show growth in retail sales slowed and manufacturing in the New York region failed to expand.

European Bonds

German bonds rose, pushing 10-year yields down three basis points to 1.55 percent. Spain’s 10-year bond yield climbed 14 basis points to 5.03 percent.

Crop prices increased as U.S. government estimates from Jan. 11 showed drought and rising demand eroded stockpiles. U.S. natural gas climbed as much as 2.5 percent to the highest this year. Oil added 0.6 percent to $94.14 a barrel in New York and Brent crude added 1.1 percent to $111.88 a barrel. China is the biggest buyer of industrial metals and energy.

Brent crude’s premium to West Texas Intermediate was at $17.71, near the highest in four months. The differential is poised to narrow to $6 next quarter, Goldman Sachs said in a report dated yesterday.

Commodity Bets

Hedge funds cut bullish commodity wagers to the lowest since June before prices rallied to a two-month high on signs of a rebound in Chinese economic growth.

Speculators trimmed net-long positions across 18 futures and options by 5.4 percent to 654,443 contracts in the week ended Jan. 8, the lowest since June 19, U.S. Commodity Futures Trading Commission data show. Wagers on a corn rally dropped for a fifth week before a reduction in U.S. stockpile data sparked the biggest jump in prices in five months. Gold holdings fell to the lowest since August as the metal snapped a six-week slump.

The Stoxx Europe 600 Index fell for a third day, slipping 0.4 percent. TNT Express NV plunged 41 percent as United Parcel Service Inc. said it expects European regulators to block its 5.16 billion-euro ($6.9 billion) takeover of the parcel-delivery firm. PostNL NV, TNT’s former parent which still holds 29.8 percent of the company’s stock, sank 36 percent. UPS rose 1.7 percent in U.S. trading.

Sky Deutschland AG climbed 1.9 percent as the broadcaster agreed on a $1 billion financing deal with shareholder News Corp. and a group of lenders that allows Rupert Murdoch’s company to increase its stake to 54.5 percent.

The Shanghai Composite Index jumped 3.1 percent, the most in a month, as regulators said foreign-investment quotas can increase. The MSCI Emerging Markets Index added 0.7 percent. Russia’s Micex Index was little changed while India’s Sensex gauge rallied 1.2 percent. Brazil’s Bovespa index rose 1 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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