U.S. stocks followed European shares lower, extending the worst weekly loss for the Standard & Poor’s 500 Index in two years, amid growing concern about international credit markets. Treasuries rose with gold.
The S&P 500 slipped 0.3 percent to a two-month low of 1,925.16 as of 4 p.m. in New York. The benchmark gauge lost 2 percent yesterday and 2.7 percent for the week. The Stoxx Europe 600 Index slid 1.2 percent to extend its three-day loss to 3 percent, its worst decline since January. Ten-year Treasury yields decreased six basis points to 2.50 percent. Gold futures rallied 0.9 percent to settle at $1,294.80 an ounce, while oil capped its worst weekly decline in seven months.
Portuguese securities regulators suspended trading in Banco Espirito Santo shares following a 73 percent slide this week for the troubled lender, while Argentina’s failure to pay interest on its bonds triggered settlement of $1 billion of default insurance, the International Swaps & Derivatives Association determined today.
“Look at the financial stocks, they’re the ones really weighing things down,” Donald Selkin, chief market strategist for New York-based National Securities Corp., said in a phone interview. “I guess credit related stress is really hurting them. The suspension of Banco Espirito’s trading and the issues in Argentina are weighing. It’s disturbing that on an ostensibly favorable domestic background we’re getting whacked and giving up gains so fast.”
Financial stocks in the S&P 500 lost 0.9 percent collectively and were the biggest drag on the index as seven of 10 industry groups retreated.
JPMorgan Chase & Co., American Express Co. and Goldman Sachs Group Inc. fell more than 1.5 percent to lead losses in the Dow Jones Industrial Average. LinkedIn Corp. jumped 11 percent after projecting revenue that beat analysts’ estimates. Procter & Gamble Co. increased 3 percent as the world’s largest consumer-products maker reported profit that topped estimates amid cost reductions. GoPro Inc. slid 15 percent after reporting a wider quarterly loss than a year earlier.
While American employers added 209,000 jobs in July, less than the estimate from a Bloomberg survey of economists, wages and hours were unchanged from June. Federal Reserve policy makers this week said they will keep interest rates low until wages accelerate and more discouraged workers find jobs.
Fed Bank of Dallas President Richard Fisher said he believes the timing has moved up for the first main interest rate increase from close to zero because of a strengthening economy and higher inflation.
“It would seem to me and I have been arguing this that the date of so-called liftoff has been moved forward,” Fisher said today in a CNBC interview. “I believe personally we have moved that forward significantly,” possibly as soon as “sometime early next year,” he said.
Equities around the world tumbled yesterday after companies from Exxon Mobil Corp. to Samsung Electronics Co. reported results that disappointed investors, Argentina defaulted and a Portuguese bank was ordered to raise capital. The Dow Jones Industrial Average slid more than 315 points yesterday, erasing its 2014 gain.
“You never want to see a flat opening after a day like yesterday where we saw broad-based selloff,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a phone interview. “On a summer Friday, you get the selling pressure early and then everyone goes home because they’re worried about liquidity and not being able to sell later. You also have the worries over what’s going on in Europe pushing stocks down.”
A private report today showed U.S. manufacturing expanded in July at the fastest pace in more than three years, showing factories will help power the economy after a second-quarter rebound. The Institute for Supply Management’s index increased to 57.1, the highest since April 2011, from 55.3 a month earlier. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 56.
Another report showed consumer confidence in the U.S. strengthened in the second half of July, as the job pictures brightened and stock markets withstood geopolitical shocks. The Thomson Reuters/University of Michigan’s final sentiment index for July rose to 81.8 from a preliminary reading of 81.3 issued last month. The measure was lower than June’s 82.5.
West Texas Intermediate oil lost 0.3 percent to $97.88 a barrel and headed for its biggest weekly decline since January amid signs of weaker fuel demand in the U.S., the world’s biggest oil consumer. Futures traded in New York declined 4.1 percent this week.
The Stoxx 600 slid today after a 1.3 percent drop yesterday, the biggest since July 8. The gauge lost 2.9 percent this week and declined 1.7 percent in July, completing its first back-to-back monthly drops since May 2012.
All 19 industry groups in the Stoxx 600 fell today.
ArcelorMittal lost 6.1 percent after the steelmaker lowered its full-year profit forecast. Vinci SA dropped 6.3 percent after Europe’s biggest builder projected a decline in annual revenue. L’Oreal SA fell 1.8 percent after the world’s largest cosmetics company reported second-quarter sales that missed analysts’ estimates.
Iliad SA sank 7 percent after the French mobile-phone carrier offered $15 billion for a controlling stake in T-Mobile US Inc.
The volume of Stoxx 600 shares changing hands today was 17 percent greater than the 30-day average, according to data compiled by Bloomberg.
Spain’s 10-year yield rose 5.5 basis points to 2.56 percent and Italy’s increased six basis points to 2.76 percent.
The cost of insuring against losses on corporate debt rose to the highest since May, with the Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies adding more than two basis points to 67.7 basis points, the highest since May. The gauge climbed six basis points this week, the biggest weekly increase since January.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, slipped 0.1 percent after earlier touching the highest intraday level since March.
The MSCI Emerging Markets Index lost 0.7 percent, extending losses this week to 1.9 percent. A gauge that tracks the performance of 20 developing-nation currencies against the greenback fell to the weakest level since March as the rupee and the won slid.
China’s official manufacturing purchasing managers’ index climbed to 51.7 for July, up from 51 in June and exceeding the 51.4 median estimate of economists surveyed by Bloomberg. The final reading on the HSBC Holdings Plc/Markit Economics China factory PMI was 51.7, missing estimates for it to match the preliminary reading of 52, an 18-month high.
Russian stocks declined as OAO Sberbank and OAO VTB Bank fell after the European Union tightened sanctions against the nation’s biggest lenders. The benchmark Micex Index dropped 0.4 percent, capping a third weekly loss. The gauge slid 6.6 percent in July, the worst monthly performance since May 2012.
ISDA’s determinations committee made the ruling on Argentina in response to a question posed by Swiss bank UBS AG after the government missed a July 30 payment deadline on $539 million of interest. Argentina is the first nation to trigger default swaps since Greece restructured its debt in 2012.
The ruling was seen by traders as complicated because Argentina made the required payment to the trustee for the bond, Bank of New York Mellon Corp. The bank said yesterday that a U.S. judge’s ruling bars it from passing the money to bondholders without a resolution of the nation’s dispute with hedge funds led by Elliott Management Corp., which sued the nation for $1.5 billion.
“These are interesting times for markets,” Keith Bowman, an equity analyst at Hargeaves Lansdown Plc in London, said in a phone interview. “Some investors are concerned for a potential interest rate hike, maybe a little bit nearer-term than some people were hoping for. Geopolitical concerns are certainly there in the background.”