U.S. Stocks Fall on Fed Bets as Twitter Jumps; Euro DropsMichael P. Regan and Lu Wang
U.S. stocks and commodities slid as faster economic growth spurred concern the Federal Reserve will scale back stimulus sooner than expected, while Twitter Inc. surged in its trading debut. The euro fell, while the region’s bonds rose, as the European Central Bank cut interest rates.
The Standard & Poor’s 500 Index declined 1.3 percent to 1,747.15 by 4:15 p.m. in New York, its biggest drop on a closing basis since August. Twitter soared 73 percent. The euro lost 0.7 percent versus the dollar and yen rallied against major peers while Japanese index futures sank. Ten-year Spanish and Italian bond yields dropped at least 10 basis points and U.S. Treasury rates also fell. Gold lost 0.8 percent as the S&P GSCI Index of commodities closed at the lowest level since April 17.
The U.S. economy expanded at a 2.8 percent annualized rate last quarter, exceeding a median economist forecast for 2 percent growth. The government’s October employment report due tomorrow is predicted to show the nation added 120,000 jobs last month and the unemployment rate rose to 7.3 percent from 7.2 percent. ECB policy makers cut their benchmark interest rate to a record low as the slowest inflation in four years threatened the central bank’s mission to keep consumer prices stable.
“The market will be volatile,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. His firm oversees about $7 billion. “You had some good economic news today and we’ll see what the payrolls numbers are tomorrow. The fear is that with better-than-expected economic numbers, tapering will commence sooner rather than later.”
Nikkei 225 Stock Average futures slid 2.7 percent to 14,015 in Chicago and lost 0.7 percent to 14,150 by 3 a.m. in Osaka. The contracts closed at 14,250 in Japan yesterday.
More than a dozen S&P 500 companies release earnings today. The benchmark U.S. gauge climbed 0.4 percent yesterday and early gains today sent it briefly above the record closing level. Earnings beat analysts’ estimates at 74 percent of the 442 companies in the S&P 500 that have released results so far, and 54 percent topped revenue projections, according to data compiled by Bloomberg.
Twitter rose to as much as 93 percent to $50.09 after raising $1.82 billion in its initial public offering by selling 70 million shares at $26 yesterday.
The microblogging service picked a price that values it higher than rival Facebook Inc. and still drew more interest than anticipated. The San Francisco-based company, which is unprofitable and has one-fifth as many users as Facebook, is benefiting from investors’ thirst for companies that will grow quickly in expanding markets like mobile advertising.
Qualcomm Inc. dropped 3.8 percent after the largest maker of smartphone chips predicted quarterly sales that came in below analysts’ estimates. Whole Foods Market Inc. sank 11 percent after cutting its profit forecast. J.C. Penney Co. jumped 5.6 percent after posting its first rise in monthly same-store sales in two years.
The better-than-estimated growth in U.S. gross domestic product was helped by the biggest gain in inventories since the beginning of 2012, a factor that risks holding back the economy this quarter as companies limit production. A 16-day partial shutdown of the federal government added to the headwinds that the Fed is trying to offset by maintaining $85 billion in monthly bond purchases intended to keep borrowing costs low.
Economists at Morgan Stanley, Credit Suisse Group AG, TD Securities USA LLC and HSBC Securities America were among those who said they might reduce their forecasts for GDP.
About three stocks dropped for every two that rose in the Stoxx Europe 600 Index. Commerzbank AG, Germany’s second-biggest lender, rallied 10 percent to the highest level since March as third-quarter net income unexpectedly rose. Siemens AG, Europe’s largest engineering company, climbed 3.4 percent after profit beat analyst forecasts. Swiss Re Ltd. rallied 1.9 percent, the most in two months, after earnings exceeded predictions.
CGG SA tumbled 8.2 percent in Paris as the largest seismic surveyor of oilfields cut its revenue forecast. Securitas AB, the world’s second-biggest guarding services provider, slid 5.6 percent, the most in 15 months, as earnings missed analyst projections.
The euro weakened against 11 of its 16 major counterparts, with the yen rallying 1.3 percent against the shared European currency. Policy makers meeting in Frankfurt today reduced the region’s main refinancing rate by a quarter percentage point to 0.25 percent. The decision was predicted by three of 70 economists in a Bloomberg News survey.
ECB President Mario Draghi, speaking to reporters in Frankfurt, said weaker growth is a downside risk to inflation.
“The ECB’s surprise decision to lower interest rates will weaken the euro, and this most likely is exactly what the central bank wants,” Daragh Maher, a currency strategist at HSBC Holdings Plc in London, wrote in an e-mailed note. “The ECB’s most potent economic tool to help growth and fight the deflation threat, especially with rates so close to zero, is the exchange rate. Today’s easing marks the first overt step in massaging the euro lower. It certainly will not be the last.”
Italy’s two-year bond yield fell to the lowest level in more than five months, decreasing 14 basis points, or 0.14 percentage point, to 1.28 percent. The rate on Germany’s two-year notes dropped five basis points to 0.09 percent, the least since July.
The Australian dollar declined against all but two of its 16 major peers. Employers cut 27,900 full-time positions last month, the biggest drop since June 2012, the nation’s statistics bureau said today. The jobless rate held at 5.7 percent.
Emerging-market stocks dropped to the lowest level in a month as OTP Bank Nyrt. dragged down Hungarian shares. The Czech koruna tumbled the most on record against the euro as the central bank approved the first currency sales in 11 years.
The MSCI Emerging Markets Index slipped 0.7 percent, falling for a sixth day. The Budapest Stock Exchange Index slid 1.7 percent as OTP, Hungary’s largest lender, plunged after the central bank urged the introduction of bankruptcy rules to protect household borrowers. The koruna weakened as much as 4.7 percent, the worst performance among 31 emerging-market currencies versus the euro. Brazil’s Ibovespa dropped 1.2 percent to the lowest level in a month as Vale SA sank.
Cocoa, gasoline, Brent crude oil and heating oil fell more than 1 percent to lead declines in 19 of 24 commodities tracked by the S&P GSCI, sending the gauge down 0.8 percent.
Gold fell to a three-week low and sugar sank to the lowest level in five weeks. West Texas Intermediate crude oil slipped the second day this week, losing 0.6 percent to $94.20 a barrel in New York.