U.S. Stocks Drop, Treasuries Rise; Apple Jumps on ProfitJoseph Ciolli
U.S. stocks fell, ending a six-day advance in the Standard & Poor’s 500 Index, and Treasuries rose as reports showed weakness in home sales and global manufacturing. Gold climbed from a 10-week low, while Apple Inc. surged in extended trading on better-than-estimated earnings.
The S&P 500 slipped 0.2 percent to 1,875.39, after completing its longest winning streak since September yesterday, and the MSCI Emerging Markets Index dropped to a one-week low. Yields on 10-year Treasuries fell one basis point to 2.7 percent, while gold futures rose 0.3 percent. Apple surged more than 8 percent after the close and Facebook Inc. climbed 4.7 percent by 5:19 p.m. in New York. New Zealand’s dollar strengthened after the central bank increased interest rates.
Sales of new U.S. homes plunged in March to an eight-month low as buyers balked at record prices and higher mortgage rates that made properties less affordable. In China, manufacturing is contracting for a fourth month, according to a preliminary survey from HSBC Holdings Plc and Markit Economics Ltd. Apple and Facebook joined more than 70 percent of S&P 500 members this earnings season posting higher profit than analysts expected.
“The market has been moving up rather well, but it can get a little tired,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “The economic news today was not anything that would drive the market higher.”
Apple shares rose to $568.48 in trading after the close of U.S. exchanges, from $524.75 in normal hours, as the company posted higher-than-estimated earnings per share for the fiscal second quarter, raised its dividend payout and expanded a buyback program. Facebook said Chief Financial Officer David Ebersman was leaving and reported better-than-estimated sales and profit for the first quarter.
New Zealand’s dollar, known as the kiwi, climbed as much as 0.3 percent to as high as 86.16 U.S. cents after the country’s central bank raised its key rate by 25 basis points to 3 percent, as predicted by economists. The Reserve Bank of New Zealand said it will be assessing the impact of the currency’s strength on inflationary pressures, according to a statement, adding that the current exchange rate isn’t sustainable.
The Nasdaq 100 Index lost 0.9 percent during regular trading as Netflix Inc. dropped after Amazon.com Inc. reached a deal to stream old episodes of HBO series. The Russell 2000 Index retreated 0.7 percent.
U.S. home sales dropped 14.5 percent to a 384,000 annualized pace, lower than any forecast of economists surveyed by Bloomberg and the weakest since July, Commerce Department data showed. The median forecast of 74 economists surveyed by Bloomberg News called for the pace to accelerate to 450,000.
The Markit Economics preliminary U.S. manufacturing index decreased to 55.4 in April from a final reading of 55.5 a month earlier, the London-based group said. A reading above 50 for the purchasing managers’ measure indicates expansion. The median forecast in a Bloomberg survey of 19 economists was 56.
AT&T Inc. slipped 3.8 percent as more customers opted to pay full price for smartphones in exchange for lower bills in the future, putting pressure on profits. Amgen Inc. dropped 5 percent after sales for its best-selling arthritis drug missed analysts’ estimates. Boeing Co. added 2.4 percent after a boost in jetliner deliveries helped profit top forecasts.
Of the 157 companies that have reported results this season, 75 percent have beaten analysts’ estimates for profit and 53 percent topped sales projections, data compiled by Bloomberg show. Profit for S&P 500 companies probably increased 0.7 percent in the first quarter, analysts project, down from a 6.6 percent gain predicted at the beginning of this year.
“These next few days are the most important of the earnings season as some big bellwethers report,” Heinz-Gerd Sonnenschein, an equity market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. “Earnings have not been great this quarter. Expectations had already been brought down quite dramatically and profit growth is weak year-on-year. The S&P 500 is holding up, but investors will need more of a signal to start buying into the market.”
The Stoxx Europe 600 Index lost 0.6 percent, while the euro gained versus most of its major peers on faster-than-forecast factory and services sector growth.
In China, the so-called flash purchasing-managers index came in at 48.3 for April from 48 in March, in line with economists’ predictions. China is the biggest trading partner for most Asia-Pacific countries.
“A slowdown in China raises more uncertainty that would lead to less funds flow,” said Robert Ramos, who helps manage about $900 million as chief investment at Union Bank of the Philippines. “Ukraine is adding to the uncertainty.”
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 1.3 percent to the lowest close since March 27. The Shanghai Composite Index dropped 0.3 percent.
Russia’s Micex Index fell 0.5 percent, extending declines since President Vladimir Putin’s intervention in Crimea at the start of March to 8 percent. Ukraine’s hryvnia gained 1.7 percent versus the dollar.
Ukraine said it’s resuming operations to oust militants from eastern cities while Russia pledged to defend its citizens in the neighboring country. An offensive is under way after its suspension for the Easter break, with security agencies seeking to eliminate all militias operating in Kramatorsk, Slovyansk and other cities, Ukraine’s First Deputy Prime Minister Vitali Yarema said.
Russia scrapped bond sales for the seventh time in eight weeks as investors demanded higher yields after the U.S. said the country wasn’t taking steps to de-escalate the crisis in Ukraine.
Billionaire Patrick Drahi is offering concessions to win over U.S. investors as he finances the acquisition of Vivendi SA’s French phone unit with the world’s biggest junk bond offering.
As part of about $23 billion of funding in euro and dollar bonds and loans to buy SFR, Drahi is paying 7.75 percent in interest on $2.9 billion of eight-year junk notes with a preliminary B rating from Standard & Poor’s. That compares with an average 5.93 percent for similarly graded debt securities due in about eight years included in the Bloomberg High-Yield Corporate Bond Index.
Portugal’s 10-year bond yield fell four basis points to 3.65 percent and touched 3.63 percent, the lowest since February 2006. The government sold 750 million euros ($1.04 billion) of 10-year securities at an average yield of 3.5752 percent, its first bond auction since requesting financial aid three years ago.