BS: U.S. Stocks Fall While Commodities Gain, Treasuries Rise
U.S. stocks fell as investors awaited the start of earnings season and the International Monetary Fund cut growth forecasts. Oil led commodities higher as Mideast tensions flared, while Treasuries and the dollar rose.
The Standard & Poor’s 500 Index (SHCOMP) decreased 0.4 percent to 1,449.89 at 10:48 a.m. in New York while the Stoxx Europe 600 Index was down 0.2 percent. The S&P GSCI gauge of 24 commodities was 0.9 percent higher as oil rallied more than 1 percent. U.S. 10-year note yields dropped three basis points to 1.71 percent. The euro slid versus 14 of its 16 major peers while the Australian dollar rebounded from a three-month low. The Shanghai Composite Index jumped 2 percent.
The U.S. third-quarter earnings season begins with Alcoa Inc. (AA) today, the fifth anniversary of the S&P 500’s record close at 1,565.15. The IMF said the world economy will grow 3.3 percent this year, the slowest pace since the 2009 recession, and 3.6 percent next year. European finance ministers praised Greece’s determination to cut spending and declined to press Spain for more budget cuts at a meeting yesterday.
“There’s so much pessimism over earnings that there’s room for upside with any positive surprise,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $170 billion, said in a telephone interview. “Overall I think traders are too pessimistic. Even with the IMF economic numbers we got, those are still pretty good numbers. The IMF is forecasting global growth next year will be above 3 percent. That’s probably higher than what most people are fearing at the moment.”
Alcoa rose 0.9 percent. Intel Corp., the world’s largest semiconductor maker, slipped 2.3 percent as Sanford C. Bernstein & Co. downgraded the shares. Edwards Lifesciences Corp. sank 18 percent after saying preliminary third-quarter sales would be lower than forecast. Netflix Inc. lost 8 percent after Bank of America Corp. lowered its rating to underperform.
Earnings at companies in the S&P 500 are projected to fall 1.7 percent in the third quarter in the first decline since 2009, according to analyst forecasts compiled by Bloomberg. Of the 500 companies in the benchmark gauge for U.S. equities, 26 have reported results so far, with profit falling an average 0.5 percent, data compiled by Bloomberg show.
The S&P 500 index (SPX) closed yesterday at 1,455.88, less than 7 percent below the 2007 record. The measure has recovered after plunging 57 percent to a 12-year low on March 9, 2009, as the subprime mortgage crisis spread among financial firms. Consumer discretionary shares and financial firms, which advanced more than 150 percent, have led the gains.
Banks, lenders and insurers are still down 55 percent since October 2007, more than three times any other industry, data compiled by Bloomberg show. Even after doubling, U.S. stocks are trading at 14.8 times earnings, a 9.8 percent discount to their five-decade average ratio, data compiled by Bloomberg show.
The Stoxx 600 Index (SXXP) pared losses after sliding as much as 0.4 percent. Nationalized Spanish lender Bankia dropped 8.7 percent as Expansion reported that parent company BFA will book losses of more than 4.5 billion euros ($5.8 billion) this year. The volume of shares changing hands in Stoxx 600 companies was 11 percent lower than the 30-day average, data compiled by Bloomberg show.
The euro weakened as German Chancellor Angela Merkel meets with Greek Prime Minister Antonis Samaras.
Wheat for December delivery gained 1.1 percent to $8.70 a bushel on the Chicago Board of Trade, advancing for a second day, on speculation that the U.S. may lower its forecasts for global supplies as dry weather damages crops from Russia to Australia. The most active contract has surged 33 percent this year. The U.S. Department of Agriculture is scheduled to release its forecasts on Oct. 11 in Washington.
Crude Discount
Crude rebounded 1.5 percent to $90.63 a barrel as Turkey sent more tanks and missile defense systems to the Syrian border yesterday. Brent oil increased 1.7 percent to $113.71. The discount of the benchmark U.S. crude oil grade to European futures closed at $22.49 yesterday, the largest gap since Oct. 20, 2011.
The Washington-based IMF cut its global growth forecasts for 2013 to 3.6 percent from 3.9 percent as the euro area’s debt crisis intensifies. European finance ministers meet for second day in Luxembourg after yesterday declaring operational the permanent aid fund, the 500 billion-euro European Stability Mechanism.
The Shanghai Composite Index rose as investors bet the government will come up with steps to support the market. South African’s rand strengthened 1.4 percent to 8.7662 per dollar, climbing for the first time in five days, after the currency’s decline to the weakest in more than three years yesterday.
The Australian dollar climbed 0.2 percent to $1.0212 after touching $1.0149 yesterday, the lowest since July 13.
To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
