U.S. Stocks, Commodities Drop on Greece Concern, Profits
U.S. stocks dropped for a third day and commodities slid as speculation increased that Greece may miss debt reduction targets and United Parcel Service Inc. cut its profit forecast. German bonds fell after Moody’s Investors Service lowered the outlook on the nation’s Aaa rating.
The Standard & Poor’s 500 Index (SPX) sank 0.9 percent to 1,338.31 at 4 p.m. New York time. Futures on the equity gauge retreated 0.5 percent after regular trading as Apple Inc. (AAPL)’s profit missed analysts’ projections. The euro depreciated 0.4 percent to $1.2069 and slid for a fifth day against the yen. The yield on the 10-year German bund climbed six basis points to 1.24 percent after matching the record low of 1.127 percent yesterday. A gauge of U.S. company debt risk rose for a third day. S&P’s GSCI gauge of 24 raw materials fell 0.5 percent.
UPS, the world’s largest package-delivery company, and Whirlpool Corp., the biggest appliance maker, declined after reporting quarterly profit that trailed analysts’ estimates. Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg yesterday, citing the “rising uncertainty” about Europe’s debt crisis.
“Europe continues to be less than positive,” Stephen Auth, the New York-based chief investment officer for equities at Federated Investors Inc., which manages $363.6 billion, said in a telephone interview. “People are looking at UPS as another sign the global economy is in a soft patch.”
Apple sank 4.8 percent after the close of U.S. exchanges. The world’s largest company by market value posted profit and sales that fell short of analysts’ projections for only the second time since 2003 as customers held off on iPhone purchases while waiting for a new model to be introduced later in the year.
Moody’s left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking. Chancellor Angela Merkel’s government said Germany will remain Europe’s haven during the financial crisis, pushing back against Moody’s decision. The risks in the euro zone are “not new” and Germany remains “in a very sound economic and financial situation,” the Finance Ministry said.
The euro area is ready to act to help Spain as the country’s borrowing costs soar, Luxembourg Finance Minister Luc Frieden said. While Frieden said no work is being done for a bailout of the Spanish government, policy makers in the 17- country euro area must be prepared to move quickly.
Spain’s benchmark 10-year bond yield reached a euro-era record of 7.625 percent earlier. Italy’s 10-year bonds fell for a third day after a report showed services and manufacturing in the euro region shrank in July. Government debt from the Netherlands dropped as its outlook was also lowered by Moody’s. Ten-year Treasury yields slipped two basis points to 1.40 percent.
“Europe’s recession is deepening and spreading to the core, including Germany,” said Kit Juckes, head of currency research at Societe Generale SA in London. “For investors, fearful of downgrades even to core debt, the path of least resistance will be to look outside Europe and hope that the U.S. data is a little stronger.”
Stocks extended losses after a Reuters report cited European Union officials saying Greece was seen missing targets for reducing debt. German Vice Chancellor Philipp Roesler said over the weekend that Greece was unlikely to be able to meet its obligations under the bailout program.
The S&P 500 pared losses in the final hour of trading after the Wall Street Journal said the U.S. Federal Reserve is moving closer to taking steps that may support economic growth. Fed Chairman Ben S. Bernanke told senators last week that the central bank is prepared to act to boost growth if the labor market doesn’t improve.
The euro weakened 0.7 percent to 94.34 yen. The Japanese currency rose versus all of its major peers as investors sought safety even as the nation’s government said it’s ready to combat its strength.
The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.3 basis points to a mid-price of 115.7 basis points, according to prices compiled by Bloomberg.
Investors watched second-quarter corporate results. Sales rose an average 2.9 percent in the second quarter among 147 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Only 40 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.
UPS (UPS) slumped 4.6 percent. The company is seeing revenue decline as it seeks to expand in Europe with the $6.5 billion acquisition of TNT Express NV. Whirlpool retreated 7.5 percent. The home appliance maker reported second-quarter earnings excluding some items of $1.55 a share, missing the average analyst estimate in a Bloomberg survey of $1.69.
DeVry Inc., a provider of education services, tumbled 25 percent after saying it plans to cut 570 jobs amid declining enrollment.
The Chicago Board Options Exchange Volatility Index, also known as the VIX, gained 8.8 percent to 20.26, the highest level since June 15.
The Stoxx 600 lost 0.5 percent. Elan Corp. sank 12 percent in Dublin after an experimental Alzheimer’s treatment developed with Pfizer Inc. and Johnson & Johnson failed to improve symptoms of dementia in a study.
Corn futures fell 0.9 percent, soybeans slumped 3.3 percent and wheat lost 3.7 percent. Rain may fall in parts of Iowa and Illinois this week and next, and the Midwest might get showers in the next 11 to 15 days, reducing severe moisture deficits, Commodity Weather Group LLC in Bethesda, Maryland, said in a report.
Oil rose for the first time in three days as clashes in Syria raised tension in the Middle East and a preliminary reading of a Chinese purchasing managers’ index showed it would be at the highest level since February. Crude futures gained 0.4 percent to settle at $88.50 a barrel on the New York Mercantile Exchange.