U.S. stocks fell for a second day amid disappointing earnings reports and data on leading economic indicators and Philadelphia-area manufacturing that trailed estimates. European shares erased earlier gains while gold rose and oil rebounded from a four-month low.
The Standard & Poor’s 500 Index lost 0.7 percent to 1,541.61 at 4 p.m. in New York, its lowest closing level since March 6. The Stoxx Europe 600 Index reversed a 0.7 percent rally to close unchanged. The euro strengthened 0.1 percent to $1.3049. Gold for immediate delivery rebounded for a third day from its worst drop in three decades, climbing 0.8 percent to $1,388.02 an ounce. Oil rallied amid a weaker dollar, while 10- year U.S. Treasury yields fell one basis point to 1.69 percent.
More than $1 trillion has been erased from the value of equities worldwide this week as concern deepened the global recovery was weakening and companies from Bank of America Corp. to Textron Inc. reported disappointing results. Finance ministers from around the world prepared to gather in Washington to discuss policies to support the economy and strengthen financial systems.
“The market was more ripe for hiccups and we’re seeing it,” David Sowerby, who helps oversee about $185 billion at Loomis Sayles & Co. in Bloomfield Hills, Michigan, said by phone. “We had a long run. Sentiment got more bearish and the earnings season has been a series of C plus.”
The S&P 500 (SPX) has retreated more than 3.2 percent from a record close on April 11, spurring concern over what UBS AG strategist Jonathan Golub called a “spring break” in equities. U.S. stocks began short-term declines in April during each of the last three years. The S&P 500 fell 9.9 percent between April 2 and June 1 of last year and peaked on April 29, 2011, before a 19 percent slide ending that October. The index tumbled 16 percent from a high in April 2010 to July 2 of that year.
Losses in the S&P 500 today were led by technology, health- care and consumer-discretionary companies, with each group losing more than 1 percent collectively. The Nasdaq 100 Index dropped 1.4 percent to extend its two-day slump to 3.4 percent, the biggest slide in five months. The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 6.4 percent to 17.56. The benchmark gauge of options prices jumped as much as 10 percent to 18.20 and briefly erased its 2013 loss amid growing demand for protection against declines in stocks.
EBay Inc. (EBAY:US) sank 5.9 percent, the most since September 2011, as the operator of the largest Internet marketplace reported first-quarter sales that missed some analysts’ estimates. UnitedHealth Group Inc. slid 3.8 percent as earnings were hurt by rising medical costs and lower government reimbursements. Morgan Stanley lost 5.4 percent after the firm reported the biggest drop in trading revenue among the largest U.S. banks.
Verizon Communications Inc. advanced 2.8 percent as growth in wireless customers helped profit beat estimates, while PepsiCo Inc. rose 3 percent to a record on better-than-estimated earnings.
After financial markets closed, quarterly results were released from International Business Machines Corp., Microsoft Corp. and Google Inc. IBM slid 3.6 percent in extended trading at 4:57 p.m. in New York after first-quarter profit missed estimates amid a slowdown in hardware sales. Microsoft climbed 2.4 percent after hours as cost controls helped boost earnings above projections. Google rose 1.4 percent as increased spending from advertisers on mobile devices helped earnings beat estimates.
‘Important Earnings Season’
Earnings beat estimates at 75 percent of the 85 companies in the S&P 500 that posted results so far this season, while 51 percent topped revenue projections, according to data compiled by Bloomberg.
“It’s an important earnings season, with market participants trying to see if corporate earnings and forecasts are going to be in-line with the weakening global macro data,” Serge Berger, a Zurich-based trader at Blue Oak Advisors LLC, said in a phone interview.
The index of U.S. leading indicators unexpectedly declined in March for the first time in seven months, a sign the world’s largest economy will cool. The Conference Board’s gauge of the outlook for the next three to six months fell 0.1 percent in March after climbing 0.5 percent in the prior two months. The median forecast of economists surveyed by Bloomberg called for a 0.1 percent increase.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 1.3 in April from 2 the prior month. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of economists surveyed called for a reading of 3. The Labor Department reported applications for jobless insurance payments increased by 4,000 to 352,000 in the week ended April 13, in line with the median forecast.
The Stoxx 600 (SXXP) ended unchanged today after closing yesterday at the lowest level of the year. The index tumbled 3.8 percent in four days, the most since a 4.4 percent slump in July.
Debenhams Plc rallied the most in more than five months after the U.K.’s second-biggest department-store chain gained market share in the first half. Syngenta AG advanced 3 percent as the chemical company’s Brazilian operations boosted revenue. Nokia Oyj tumbled 8.3 percent after the mobile-phone maker posted results that disappointed investors.
GlaxoSmithKline Plc climbed 3.2 percent to the highest in 11 years after advisers to the U.S. Food and Drug Administration recommended that experimental treatment Breo Ellipta be approved to treat a lung disorder.
Spain’s 10-year bond yield dropped one basis point to 4.67 percent, paring a drop of as much as eight points, and Italy’s added one point to 4.26 percent.
Spain sold 2023 bonds at an average yield of 4.612 percent, the least since September 2010. France raised 7.91 billion euros in a debt sale, with the yield on five-year notes falling to a record low auction rate of 0.73 percent.
The MSCI Emerging Markets Index (MXEF) declined 0.4 percent. South Korea’s Kospi index sank 1.2 percent as LG Display Co. tumbled 4.8 percent, the most in four months, after audio-chip maker Cirrus Logic Inc. reported an inventory glut that suggests iPhone sales may fall short of estimates. Hon Hai Precision Industry Co., which assembles Apple Inc.’s iPhone, dropped 1.3 percent in Taipei to the lowest level since Aug. 3.
Russia’s Micex Index was little changed while Brazil’s Bovespa rallied 0.5 percent Gol Linhas Aereas Inteligentes SA jumped almost 11 percent.
Oil for May delivery rose 1.2 percent to $87.73 a barrel in New York amid a weaker dollar and signals that recent declines were exaggerated. The 14-day relative-strength index for oil slid to 29.9 yesterday, a sign prices may have fallen too far.
Gold for immediate delivery advanced for a third day after the biggest plunge in three decades. The S&P GSCI gauge of 24 commodities climbed 0.8 percent as natural gas, coffee and heating oil also added more than 2 percent. European Union emission permits rebounded 12 percent after tumbling 42 percent the previous two days.
The gain in gold came amid signs that demand is rebounding among consumers and investors. The China Gold Association said that retail sales soared on April 15 and April 16, and the All India Gems & Jewellery Trade Federation said that demand climbed to the highest this year.
Gold’s price peak in 2011 probably signals the end of China, emerging economies and commodities leading the financial markets, according to Bank of America Merrill Lynch.
The precious metal, which rose to an all-time high of $1,921.15 an ounce in London trading on Sept. 6, 2011, has slumped 17 percent this year. In 1980, a peak in gold prices preceded by several quarters the end to a bear market for bonds and a peak in inflation and oil prices, the bank’s investment strategists led by Michael Hartnett wrote in a report today.
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