S&P Index Pares Loss; Bond Risk Rises to Record as Europeans Prepare Sales
U.S. stocks pared losses and shares fell worldwide for a fourth day, the longest losing streak since November. The cost of insuring European sovereign debt against default rose to a record as Portugal, Spain and Italy prepared to borrow at least $43 billion this week. Oil surged.
The Standard & Poor’s 500 Index slipped 0.1 percent at 4 p.m. New York time, trimming its decline from 0.7 percent at the start of trading. The MSCI All-Country World Index of shares in 45 nations fell 0.5 percent, driven by European and Asian losses. The Markit iTraxx SovX Western Europe index climbed a fourth day, reaching a record high. Oil rose as much as 2.2 percent after a leak at an Alaskan pipeline. March S&P 500 futures were unchanged as Alcoa Inc. dropped 1.5 percent to $16.24 at 4:48 p.m. in New York.
U.S. stocks rebounded from the lows of the day as companies from Apple Inc. to General Electric Co. and Ford Motor Co. rallied, while Alcoa advanced before reporting quarterly profit that beat estimates following the close of U.S. exchanges. Equities dropped globally as Europe’s most indebted governments prepared to hold their first bond auctions this week for 2011, a year when they have to raise about $1 trillion.
“There’s going to be a lot of seesawing over the next few days until we start to get some earnings reports,” said John Carey, a Boston-based money manager a Pioneer Investments, which oversees about $250 billion. “Then, the direction will be clear. People are optimistic about the earnings outlook. Once you put the concern about the European debt crisis behind you and focus on the earnings, maybe you’ll be more optimistic.”
Early losses in equities were driven by concern that some European nations are struggling to repay their debt. Credit- default swaps on Portugal rose 12 basis points to 550, according to CMA. Ireland soared 28.5 basis points to an all-time high 686.5 and Belgium was 5.9 higher at a 253.9. The Markit iTraxx SovX Western Europe climbed to a record 221.8 basis points.
The MSCI World Index of stocks in developed markets slumped 0.5 percent to 1,275.61. It surged 24 percent between July 5 and the end of 2010 amid speculation the global economic recovery would continue. Utilities slumped second-most among 10 industries in the S&P 500 after Duke Energy Corp. agreed to buy Progress Energy Inc. for $13.7 billion in stock.
Portugal’s PSI-20 Index tumbled 1.6 percent, while Spain’s IBEX 35 slid 1.3 percent. Bank stocks led the selloff, with KBC Groep NV, Belgium’s biggest lender, plunging 9.1 percent and Banco Comercial Portugues SA losing 3.2 percent.
‘Continue to Flare’
“The European debt issues will continue to flare,” said Mike Ryan, the New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees about $641 billion. “This is not enough to alter our view about risk assets and the recovery process, but it’s one of those things that will flare periodically and will challenge investors’ sentiment.”
Strayer Education Inc. led losses among for-profit U.S. education stocks after forecasting less profit than analysts estimated following a plunge in enrollment. The shares dropped 23 percent, the most since 2000. A Bloomberg index of 13 companies in the industry fell 11 percent. President Barack Obama has pushed for stronger regulation of the group.
Losses in emerging-market stocks were led by Indonesia and India amid concern accelerating inflation will prompt interest rate increases. The Jakarta Composite Index sank 4.2 percent, the most in two years, while India’s Sensex slid 2.4 percent. Benchmark gauges for China, Thailand, Poland, Turkey and the Czech Republic lost at least 1 percent. The MSCI Emerging Markets Index retreated 1 percent to 1,136.20.
Dollar, Euro, Yen
The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, declined 0.1 percent after rising as much as 0.4 percent.
Oil climbed as high as $89.98 a barrel. The Trans-Alaska Pipeline System was closed Jan. 8, forcing companies including BP Plc to suspend 95 percent of production from the North Slope area. BP shares fell 2 percent.
Corn futures rose for the first time in three days in Chicago on concern that dry weather in Argentina will hold back production in the second-largest shipper of the grain, depleting global stockpiles.
The cost of protecting U.S. corporate bonds from default climbed to the highest level in a month. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.8 basis point to a mid-price of 89.2 basis points as of 4:31 p.m. in New York, according to index administrator Markit Group Ltd.
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