U.S. and European stocks fell as companies from Amazon.com Inc. (AMZN:US) to LVMH Moet Hennessy Louis Vuitton SA (MC) missed earnings estimates. Treasuries rose as durable-goods data raised concern over the pace of business investment.
The Nasdaq 100 Index fell 0.5 percent at 4 p.m. in New York as Amazon sank 9.7 percent. The Standard & Poor’s 500 Index retreated 0.5 percent after closing at a record for two straight days. The Stoxx Europe 600 Index slipped 0.7 percent, dropping from a two-week high. Russia’s Micex Index declined 1.5 percent and gold jumped 1 percent. The Bloomberg Dollar Spot Index advanced to the strongest level in more than a month. The yield on 10-year Treasuries slid 4 basis points to 2.47 percent.
Amazon plunged after the world’s largest online retailer posted a wider loss than analysts had estimated, while LVMH missed estimates amid weaker consumption in Asia. A Commerce Department report showed orders for U.S. business equipment rose in June following a revised drop the prior month, indicating corporate investment remains stop-and-go and could hold back growth. Goldman Sachs Group Inc. said equities are at risk of a temporary selloff, citing rising bond yields and high valuations.
“The market is really looking at micro level numbers on a lot of these companies,” Ian Kerrigan, global investment specialist at JP Morgan Private Bank in Seattle, said in a phone interview.
Amazon, the world’s largest online retailer, tumbled the most since April as its cloud-computing business showed signs of cooling and investments in new distribution warehouses and gadgets held back profitability. Pandora Media Inc. sank 10 percent after the biggest Internet radio service reported listener growth that missed some analysts’ projections. Visa Inc. (V:US) declined 3.6 percent after the largest payments network lowered its revenue forecast (V:US) for the rest of the year.
Eleven companies in the S&P 500 reported earnings today. About 78 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 66 percent exceeded sales projections, according to data compiled by Bloomberg. Profits probably rose 8.2 percent in the second quarter, while sales gained 3.5 percent, according to analyst estimates compiled by Bloomberg.
The S&P 500 was little changed for the week. The gauge was up 0.5 percent over the past four days as corporate earnings reports boosted confidence in the economy and inflation data signaled the Federal Reserve won’t be compelled to raise interest rates in the near future.
The central bank announces its next policy decision at the conclusion of a two-day meeting on July 30. Investors will get a reading on second-quarter growth that same day, while the government’s jobs report on Aug. 1 may show employers added 230,000 jobs this month.
Chair Janet Yellen said last week the central bank must press on with stimulus to combat persistent weakness in the job market. The S&P 500 advanced 7.6 percent this year through yesterday as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter.
Data today showed bookings for non-military capital goods excluding aircraft climbed 1.4 percent after a 1.2 percent decrease in May that was previously reported as a 0.7 percent gain, data from the Commerce Department showed today in Washington. Demand for all durable goods -- items meant to last at least three years -- increased 0.7 percent.
“Durable goods orders continue to be anemic relative to where they should be in the capex cycle,” Lincoln Ellis, managing director at Green Square Capital Management LLC in Memphis Tennessee, said in a phone interview. “CEOs in America are very cautious about reinvesting in capital expenditures because they understand the underlying economy continues to be lackluster.”
With the S&P 500 fresh off two straight record closes, Leuthold Group LLC’s Douglas Ramsey says it’s time for a correction. The Minneapolis-based firm’s chief investment officer said today he is expecting an 8 to 10 percent pullback in the equity market over the next couple of months.
Goldman Sachs cut its rating on stocks to neutral, the equivalent of hold, for the next three months, according to a quarterly research report from its portfolio strategy group today. Goldman Sachs also lowered corporate credit to underweight and predicted that government bond yields will increase.
“The acceleration in economic growth is largely behind us and geopolitical risks are elevated,” a group of 11 strategists, including David Kostin, Kathy Matsui and Peter Oppenheimer, said in the report, known as the global opportunity asset locator. “In the short term we worry that a rise in bond yields will drive equities lower.”
The yield on 10-year notes fell for the first time in three days on the durable-goods orders. Treasuries returned 3.3 percent this year through yesterday, according to Bloomberg World Bond Indexes, the most over the equivalent period in four years.
The Stoxx 600 slid today after three daily gains that sent it to its highest level since July 7. The gauge trimmed its increase for the week to 0.7 percent, and is about 2 percent away from its six-year high reached June 10.
LVMH lost 6.8 percent as Chief Financial Officer Jean-Jacques Guiony said Asian demand weakened “quite significantly” in the second quarter, led by slower Chinese spending at home and abroad.
British Sky Broadcasting Group Plc fell 5.5 percent after offering to buy 21st Century Fox Inc.’s Sky Italia unit and 57 percent stake in Sky Deutschland AG to expand in Europe. Sky Deutschland rose 1.4 percent.
Royal Bank of Scotland Group Plc (RBS) jumped 11 percent after saying pretax profit almost doubled in the first half of the year and forecasting that it will meet a target to cut costs by 1 billion pounds ($1.7 billion) in 2014.
Air France-KLM Group rose 2.6 percent after Europe’s largest airline group posted second-quarter profit that exceeded estimates.
Germany’s DAX Index (DAX) lost 1.5 percent, the biggest drop since April 25. Business confidence in the nation slipped in July more than economists had forecast, according to a report from the Ifo institute. Separate data showed that consumer confidence in Europe’s largest economy will increase in August to its highest level since December 2006, forecasts from GfK SE, a Nuremberg-based market research company, showed.
Russia’s Micex (INDEXCF) extended its drop this week to 2.4 percent, and the ruble weakened 0.1 percent against the dollar. Ukraine and Russia traded accusations as tensions between the ex-Soviet neighbors intensified. The U.S. said Russia is firing artillery over its border into Ukraine, the first time American officials have publicly alleged direct participation in fighting on behalf of separatists.
The European Union is preparing to sanction Russia’s most senior spies and security officials, according to a draft document obtained by Bloomberg News.
Russia’s central bank increased its one-week auction rate to 8 percent from 7.5 percent. None of the economists surveyed by Bloomberg predicted an increase, with 22 of 23 forecasting no change and one projecting a quarter-point cut.
Brent oil climbed to a two-week high, widening its premium to West Texas Intermediate, amid the conflict in eastern Ukraine. Brent increased 1.2 percent while WTI rose 2 cents.
Gold and silver futures jumped the most in a week as escalating havoc in Eastern Europe and the Middle East boosted demand for haven assets. Gaza Strip violence expanded after dozens of Palestinians and 13 Israeli soldiers died in the conflict’s bloodiest single day.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, rose 0.2 percent to 1,014.12, the highest level since June 17. The gauge increased 0.5 percent this week.
The MSCI All-Country World Index slipped 0.4 percent today, for a 0.4 percent weekly gain. The MSCI Emerging Markets Index fell 0.2 percent, trimming this week’s advance to 1.5 percent. The MSCI AC Asia Pacific Index rose 0.2 today, climbing to its highest level since June 2008 and sending its weekly advance to 1.3 percent.
Chinese shares may climb another 20 percent, following a 19 percent surge in the Hang Seng China Enterprises Index (HSCEI) since March 20, according to Mark Mobius, executive chairman of Templeton Emerging Markets Group. He favors state-owned banks and energy companies because of their cheap valuations and the government’s plans to open up state-dominated industries.
The Shanghai Composite Index gained 1 percent to a three-month high. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.5 percent today.
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