The euro snapped a five-day drop amid speculation that policy makers may expand Europe’s rescue fund. U.S. stocks erased gains as Apple Inc.’s results and an unexpected drop in new U.S. home sales outweighed a rally in financial shares.
The euro added 0.8 percent to $1.2151 as of 3:23 p.m. in New York. The pound weakened after the U.K. economy shrank the most in three years. The S&P 500 was little changed at 1,338.28. Apple tumbled 4.1 percent after reporting iPhone sales that missed projections. S&P’s GSCI gauge of 24 commodities gained 0.6 percent.
Demand for new U.S. homes fell in June from a two-year high, indicating the housing recovery will be uneven. There are arguments in favor of granting a banking license to the permanent bailout fund, said Ewald Nowotny, a European Central Bank council member who also heads Austria’s central bank. Granting a banking license to the ESM would give it access to ECB lending.
“We have a deepening recession in Europe, and a deceleration in North America, and that is leading investors to believe there’s going to be some sort of additional stimulus applied by the central banks,” said Peter Sorrentino, who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati.
The pound slumped 0.8 percent to 78.38 pence per euro. The U.K. economy shrank more than economists forecast in the second quarter as record rainfall and an extra public holiday sent output down the most in more than three years.
Apple headed for the biggest decline since April. The company sold 26 million iPhones in the fiscal third quarter, compared with the 28.4 million predicted by analysts surveyed by Bloomberg. That caused it to miss quarterly sales and profit estimates for the second time since 2003.
“Apple is priced for perfection,” Mark Eibel, the director of client-investment strategies in North America at Russell Investments Ltd., told Bloomberg Television. “Other companies may be able to have a quarter like this but when Apple does it, it will move markets around the world. It’s certainly not what this market is looking for.”
A gauge of homebuilders in S&P indexes slid 3.2 percent. Sales of new U.S. homes fell 8.4 percent to a 350,000 annual rate, the weakest since January, the Commerce Department reported today in Washington.
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