Bloomberg News

Stocks, Euro Trim Losses on Optimism Greece to Back Austerity

February 21, 2012

Feb. 14 (Bloomberg) -- Most U.S. stocks fell as a rally in the final half hour spurred by optimism Greece will commit to budget cuts stopped short of erasing a decline in the Standard & Poor’s 500 Index. The euro pared losses while Treasuries and the dollar trimmed gains.

The S&P 500 slipped less than 0.1 percent to 1,350.5 at 4 p.m. in New York after tumbling as much as 0.8 percent. Almost two stocks declined for each that rose on U.S. exchanges. The euro was down 0.5 percent to $1.3120 after slumping 0.8 percent earlier. Ten-year Treasury yields fell four basis points to 1.94 percent, paring a six-point decline. Most commodities retreated, while natural gas surged 4.2 percent on forecasts for colder weather in the western U.S.

The leaders of Greece’s biggest political parties will send commitments tomorrow to the so-called troika to stand by austerity measures, a government official said today. Equities and the shared currency slid earlier as finance ministers canceled a meeting for tomorrow and Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro finance panel, said he hadn’t received assurances from Greek lawmakers about measures required for the 130 billion euros ($170 billion) bailout.

“For now, it looks like Greece may be able to kick the can down the road again,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland, said in a telephone interview. “The issue overseas is less a function of whether they come to an agreement with respect to Greece. The odds are that they will. The larger issue is how much continuing deterioration do you have in the European economy?”

Retail Sales

U.S. equities opened the session lower after Commerce Department data showed that sales at U.S. retailers rose 0.4 percent in January, half the 0.8 percent forecast of economists in a survey. Separate government data showed U.S. business inventories trailed the improvement in sales in December, showing companies may continue to restock shelves and warehouses in early 2012. The 0.4 percent increase in stockpiles followed a 0.3 percent advance the prior month, Commerce Department data showed.

Financial, commodity and industrial companies lost at least 0.3 percent to lead declines in five of the 10 main industry groups in the S&P 500 today. Bank of America Corp. fell 3.3 percent after Citigroup Inc. cut its recommendation on the shares. Goodyear Tire & Rubber Co. retreated 5.2 percent as revenue at the largest U.S. tiremaker missed analysts’ forecasts. Masco Corp. dropped 12 percent after the home building products maker reported a quarterly loss.

Earnings Season

The S&P 500 is up 7.4 percent so far this year and has rebounded 23 percent from last year’s low amid better-than- forecast earnings and improving economic data. Earnings have topped analysts’ estimates at about 70 percent of the 342 companies in the S&P 500 that reported results since Jan. 9, according to data compiled by Bloomberg.

Thirty-year Treasuries also advanced, sending their yield down four basis points to 3.09 percent. Two-year yields were little changed at 0.29 percent. The difference between the yield on two-year note and 10-year securities, the so-called yield curve, dropped to 1.65 percentage points today, the least since Feb. 3. A narrowing yield curve suggests investors anticipate slow economic growth and inflation.

Dollar Climbs

The Dollar Index, a gauge of the currency against six major peers, climbed 0.6 percent to 79.444. The yen fell 1.1 percent to a three-month low versus the dollar after the Bank of Japan said it would increase the size of its asset-purchase fund, damping demand for the Asian nation’s currency.

Among the 24 commodities tracked by the S&P GSCI index, 11 advanced and 13 retreated, sending the gauge down 0.2 percent. Oil for March delivery dropped 17 cents to settle at $100.74 a barrel on the New York Mercantile Exchange. It reached $101.84 earlier, the highest price since Jan. 19. Prices have gained 1.9 percent this year.

Natural gas for March delivery rose 10.1 cents to $2.532 per million British thermal units on the New York Mercantile Exchange, the biggest gain since Feb. 2. Gas has declined 15 percent this year and dropped to $2.231 on Jan. 23, the lowest intraday price since February 2002. Today’s gain came as the National Weather Service predicted the western U.S. may experience below-normal temperatures over the next six to 15 days.

The Stoxx Europe 600 Index slipped 0.2 percent, erasing an early 0.4 percent advance. ThyssenKrupp AG fell 3.8 percent after Germany’s biggest steelmaker posted a first-quarter loss following project delays. Nokia Oyj, the biggest maker of mobile phones, rose 2.1 percent after Nokia Siemens Networks’ Chief Executive Officer, Rajeev Suri, was reported to say that he doesn’t rule out holding an initial public offering.

German Confidence

Earlier gains in European stocks came after the ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations rose to 5.4 this month from minus 21.6 in January, compared with a median forecast of minus 11.8, according to a Bloomberg survey of economists. The U.K. and France may be stripped of their top Aaa ratings, Moody’s said as it reduced the debt rankings of countries including Italy, Spain and Portugal.

“Signs that the European Monetary Union economy is stabilizing, rather than collapsing as some have feared, and hopes of a resolution of the EMU debt crisis seem to have supported the economic sentiment,” Annalisa Piazza, a fixed- income analyst at Newedge Group in London, said in e-mails. Italy’s debt offerings “were well absorbed, despite last night’s downgrade by Moody’s that, in our view, was somehow expected.”

Italian bonds advanced for a second day as the nation’s borrowing costs fell at a sale of 6 billion euros ($7.9 billion) of debt.

Italy’s two-year note yields decreased three basis points to 3.05 percent and the 10-year rate fell three basis points to 5.57 percent. The yield on Spain’s 10-year bond rose two basis points, paring an increase of as much as five basis points, after the government sold 5.45 billion euros of bills.

--With assistance from Claudia Carpenter, Abigail Moses, Andrew Rummer, Daniel Tilles, Jason Webb and Stephen Kirkland in London, Lynn Thomasson in Hong Kong, James G. Neuger in Brussels and Cordell Eddings and Susanne Walker in New York. Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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