BLBG: U.S. Stocks Little Changed as China Raises Interest Rates
U.S. stocks were little changed, after the Standard & Poor’s 500 Index snapped a 5-day rally yesterday, as China said it will raise interest rates in an effort to cool inflation.
Bank of America Corp. (BAC) declined 2.1 percent, as financial and telecommunication shares led declines in the S&P 500. General Motors Co. (GM) advanced 1.9 percent after Morgan Stanley raised its recommendation on the industry to “attractive.”
The S&P 500 declined 0.1 percent to 1,336.13 at 9:37 a.m. in New York after the benchmark gauge slid 0.1 percent yesterday. The Dow Jones Industrial Average rose 7.94 points, or 0.1 percent, to 12,577.81 today.
“China is perceived as the economic engine of the world right now,” said Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, which manages about $500 million. “Them slowing down by raising interest rates at a time when we have an overhang of high unemployment and low growth in the U.S. as well as the sovereign debt issues in Europe causes investors to get concerned about what the impact will be on our markets and economies.”
U.S. stocks fell yesterday after rising 5.6 percent last week, the biggest rally since July 2009, as Moody’s Investors Service downgraded Portuguese debt to junk, reigniting concern that Europe’s sovereign-debt crisis will dampen economic growth. The S&P 500 has slipped 1.9 percent since its peak this year at the end of April. The gauge lost 1.8 percent in June as investors speculated that Greece would default on its debt.
Meeting in Paris
Greece’s bondholders meet with officials in Paris today to discuss a proposed rollover of the nation’s debt. European Union leaders insist that private investors contribute to a new aid package for the indebted nation after last year’s 110 billion- euro ($158 billion) rescue failed to contain the euro area’s debt crisis.
U.S. futures dropped today on further concerns over the global economy after China’s central bank said it will raise its benchmark deposit and lending rates by 25 basis points tomorrow. This is the third time this year China has raised rates as it tries to cool the world’s fastest-growing economy after inflation accelerated to the quickest pace since 2008.
A report today may show that U.S. service industries grew at a slower pace last month, showing the expansion cooled at the end of the first half of 2011, economists said before the release of the data at 10 a.m. in New York.
Non-Manufacturing Index
The Institute for Supply Management’s non-manufacturing index likely fell to 53.7 in June from 54.6 in May, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal expansion.
Bank of America, the largest U.S. lender, declined 2.1 percent to $10.77. General Motors advanced 1.9 percent to $31.43 after Morgan Stanley upgraded U.S. carmakers to “attractive” from “in line.” The brokerage named GM as its top pick among automakers.
To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
