Stocks declined amid corporate earnings that disappointed investors and growing concern the Federal Reserve may reduce its bond purchases, while oil capped the biggest four-day slide in nine months. The pound gained after the Bank of England raised its growth forecast.
The MSCI All-Country Index lost 0.6 percent to 374.59 and the Standard & Poor’s 500 Index slipped 0.4 percent at 4 p.m. in New York, extending its three-day drop to 1.1 percent. Japan’s currency gained 1.3 percent to 96.44 per dollar and the pound climbed to a six-week high versus the dollar. The yield on 10-year Treasury notes decreased 4.5 basis points to 2.60 percent. Oil extended its four-day retreat to 3.3 percent, while gold rebounded following its longest slump in 11 weeks.
Fed Bank of Cleveland President Sandra Pianalto said a tapering of the central bank’s stimulus may be warranted if the labor market continues to strengthen. The Bank of England raised its outlook for the economy this year and next and said price stability remained a primary objective as it linked interest rates to the jobless rate for the first time. The Bank of Japan probably won’t expand stimulus at its two-day meeting that ends tomorrow, according to all 25 economists surveyed by Bloomberg.
“We’re just going through a period of consolidation,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. His firm manages $112 billion. “We still like the outlook for the broad equity market, but near term we’re probably in a trading-range pattern until we get greater clarity as to what happens with quantitative easing.”
Financial shares lost 0.8 percent to help lead declines in eight of the 10 main industry groups in the S&P 500. Bank of America Corp. declined 0.8 percent after the Department of Justice yesterday accused the company in a lawsuit of misleading investors.
Walt Disney Co. dropped 1.7 percent after quarterly profit stalled on lower earnings from films and weaker revenue at the ABC network. First Solar Inc. tumbled 13 percent after the largest U.S. solar-panel manufacturer’s profit fell amid a 46 percent drop in sales. Zillow Inc. plunged 7.7 percent after the owner of the largest real-estate information web site reported a second-quarter loss on higher costs related to advertising and acquisitions.
Earnings have beaten analyst estimates at about 72 percent of the 434 companies in the S&P 500 that posted results so far in the reporting season, according to data compiled by Bloomberg. Profits increased 4.1 percent for the group on 1.7 percent growth in sales.
Two shares fell for each that gained in the Stoxx Europe 600 Index, which slipped 0.2 percent.
Andritz AG, the world’s second-biggest maker of hydro-power turbines, slid 7.9 percent in Vienna after profit missed estimates. Rexel SA dropped 4.2 percent as Ray Investment SARL, the company’s largest investor, sold a 526 million-euro ($698 million) stake in the electrical-equipment distributor.
The MSCI World AC Index has lost 1 percent in the past three days as investors gauge the prospects for continued central-bank stimulus.
Dallas Fed President Richard Fisher said on Aug. 5 the central bank is closer to slowing bond buying and warned investors not to rely on stimulus. Dennis Lockhart, president of the Atlanta Fed, told Market News International that should economic growth and job creation pick up as expected, policy makers should proceed with the “removal” of asset purchases.
Fed Bank of Chicago President Charles Evans said yesterday he “would clearly not” rule out a decision to begin curbing bond purchases in September.
“We’ve seen good improvement in the labor market, there’s no question in my mind about that,” Evans, among the strongest proponents of the unprecedented efforts to revive the U.S. economy, told reporters yesterday in Chicago. “I’m still wanting to see greater evidence that it’s a sustainable improvement.”
Treasuries remained higher after the U.S. sale of $24 billion in 10-year notes produced a lower-than-forecast yield. The benchmark securities drew a yield of 2.620 percent, compared with a forecast of 2.635 percent in a Bloomberg News survey of eight of the Fed’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.45, compared with an average of 2.81 for the past 10 sales.
The MSCI Emerging Markets Index fell 0.9 percent to a four-week low today after results from companies including Tata Motors Ltd. and AngloGold Ashanti Ltd. missed analysts’ estimates. India’s rupee led declines in currencies.
South Korea’s Kospi index dropped 1.5 percent, led by Hyundai Motor Co. and Kia Motors Corp. after their labor unions walked out of wage talks. TPK Holding, a supplier of touch screens to Apple Inc., slumped 6.9 percent in Taipei after the company said it expects third-quarter revenue to drop by at least 15 percent.
The Nikkei 225 Stock Average sank 4 percent in Tokyo, the most in almost two months, as exporters slipped amid a stronger yen and earnings disappointed investors.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 2.1 percent, the most in five weeks. The Shanghai Composite Index slid 0.7 percent.
The Bloomberg Dollar Index, a gauge of the currency against 10 major peers, slipped 0.3 percent.
The yen rose against all 16 major counterparts, advancing 1.1 percent versus the euro. The Bank of Japan will expand its record easing by June next year as inflation remains distant from its 2 percent target, according to a survey of economists by Bloomberg News.
Twenty of 26 analysts expect more stimulus in the next 10 months, while all said the BOJ would keep policy on hold at a two-day meeting starting today. Consumer prices excluding fresh food, the BOJ’s preferred measure of inflation, rose 0.4 percent in June. Koichi Hamada, a retired Yale University professor who advises Prime Minister Shinzo Abe on monetary policy, said today that Governor Haruhiko Kuroda should be prepared to add easing if the economy falters after a planned sales-tax increase in April.
The pound advanced 0.9 percent to $1.5493. The BOE said it sees the economy growing 0.5 percent this quarter after expanding 0.6 percent in the previous three months. It raised its 2013 and 2014 gross domestic product growth projections to 1.5 percent and 2.7 percent from 1.2 percent and 1.9 percent in May.
The euro was up 0.3 percent at $1.3338, after falling as much as 0.3 percent. German industrial production increased 2.4 percent from May, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.3 percent, according to the median of 41 estimates in a Bloomberg News survey.
The S&P GSCI gauge declined 0.8 percent as natural gas tumbled 2.1 percent to lead losses in 15 of 24 commodities. Gold futures settled up 0.2 percent at $1,285.30 an ounce after sliding for six straight sessions.
West Texas Intermediate oil fell 0.9 percent to $104.37 a barrel. A government report showed inventories of gasoline and distillate fuels unexpectedly increased. The Energy Information Administration said gasoline inventories rose 135,000 barrels to 223.6 million last week. Stockpiles were forecast to decrease 500,000 barrels, according to the median of 11 analyst estimates in a Bloomberg survey.