U.S. Stocks Drop Most in 2 Weeks as Oil Falls, Dollar Gains

Is the Gloom Lifting on the Mining Sector?
  • Alphabet, Microsoft retreat in afterhours trading on earnings
  • ECB keeps interest rates, asset-purchase program unchanged

U.S. stocks slid the most in two weeks amid disappointing corporate results and a retreat in crude, as rallies in risk assets faltered amid growing concern central-bank stimulus won’t spark growth.

The Standard & Poor’s 500 Index retreated from a four-month high after climbing within 1 percent of its record. Results from Alphabet Inc., Microsoft Corp. and Visa Inc. reported after regular trading disappointed investors. Shares in the Google parent and Microsoft fell at least 4 percent in afterhours trading as of 5:10 p.m. in New York. The euro ended little changed after whipsawing after the European Central Bank’s latest policy meeting. Crude fell below $43.50 a barrel, and Treasuries declined as U.S. jobless claims sank.

The nine-week rally in U.S. equities has faltered about 1 percent short of the S&P 500’s all-time high, as results from corporate America have done little to alleviate concern that signs of accelerating economic expansion haven’t yet translated into profit growth. The ECB’s decision to refrain from further easing sent the euro on a wild ride as policy makers struggle to convince investors that unprecedented stimulus will jumpstart growth in the region after years of failing to do so.

“This is an overdue pull-back as the market has pretty much straight-lined up since February,” Gene Peroni, a fund manager at Advisors Asset Management Inc. in Conshohocken, Pennsylvania, said by phone. “I don’t know if there’s one thing attributable to it. Materials and commodities are under pressure as well today and that area has had a lot of momentum.”

Stocks

The S&P 500 slid 0.5 percent at 4 p.m. in New York, falling below 2,100 for the first time in three days. Verizon Communications Inc. and Travelers Cos. dropped more than 3.3 percent after reporting results, while Coca-Cola Co. sank for a second day following an underwhelming report on Wednesday. American Express Co. added 1.2 percent after its profit beat estimates.

Alphabet dropped as quarterly sales and profit missed analysts’ estimates. The world’s largest Internet search provider is grappling with a slowdown in advertising. Microsoft sank after its earnings missed, with a weak personal-computer market pulling down results.

Telephone stocks and energy producers led the MSCI Emerging Markets Index up 0.3 percent. The gauge has rallied 7.6 percent this year, compared with a 2 percent advance in the MSCI World Index of developed countries.

Commodities

The Bloomberg Commodity Index dropped 0.7 percent after earlier jumping as much as 1.1 percent, after the dollar climbed following the U.S. jobless claims report. Gold and silver, up at least 14 percent in 2016, both pared gains.

West Texas Intermediate for June delivery dropped 2.3 percent to settle at $43.18 a barrel, while Brent crude, the European benchmark, retreated 2.8 percent following a 6.7 percent jump over the previous two sessions. Crude advanced on Wednesday as the Energy Information Administration reported that last week’s U.S. output was the lowest since October 2014. Cooperation between producers is still possible, said Saudi Oil Ministry adviser Ibrahim Al-Muhanna.

“The market is catching its breath after a strong rally,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “Production dropped to an 18-month low last week, which is pretty significant, but it comes while we have a huge oil oversupply in storage.”

Currencies

The Mexican peso led losses among the world’s most-traded currencies as a drop in crude prices dimmed the outlook for government revenue in the oil-producing nation.

The euro was little changed at $1.1291, after climbing as high as $1.1398. The currency fell for the first time in four days versus the yen, slipping 0.4 percent to 123.62 yen.

The Bloomberg Dollar Spot Index advanced 0.3 percent to the highest level in a week.

Bonds

The yield on 10-year U.S. Treasuries rose two basis points to 1.87 percent, after increasing nine basis points in the last three sessions. Inflows into inflation-indexed exchange-traded bond funds this year have already exceeded flows for all of 2015, suggesting investors are growing more bullish that inflation will climb toward the Fed’s 2 percent target.

European government bonds declined after Draghi said the region’s inflation should pick up in the second half of the year. Germany’s 10-year bund yield rose nine basis points to 0.24 percent, the highest in more than a month.

“Draghi’s confidence in the return to inflation” is weighing on European bonds, said Matthew Cairns, a strategist at Rabobank International in London. “Plus, he’s made it clear that there has been no discussion of ‘desperate measures’ in the shape of helicopter money,” he said, referring to a more direct form of central-bank stimulus to the economy than quantitative easing.

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