BLBG: U.S. Stocks Fall As Germany Comments On Banking License
U.S. stocks fell, trimming a second straight monthly rally for the Standard & Poor’s 500 Index, after the German finance ministry said it sees no need to give Europe’s bailout fund a banking license.
The S&P 500 fell 0.1 percent to 1,384.21 at 9:32 a.m. New York time. The benchmark gauge has rallied 1.7 percent so far this month.
The rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank, the Finance Ministry said today in an e-mailed response to a question on a newspaper report. The ministry isn’t holding talks on the topic and neither are secret meetings taking place on such a proposals, the ministry said.
Stock futures rose earlier after companies from U.S. Steel Corp. to Pfizer Inc. (PFE) reported earnings that exceeded analysts’ estimates. Profits at 73 percent of S&P 500 companies which reported quarterly results have beaten analysts’ estimates, according to data compiled by Bloomberg.
Federal Reserve Chairman Ben S. Bernanke will probably forgo announcing a third round of large-scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey.
Economic Reports
Residential real estate prices declined less than forecast in the year ended May, another sign that the housing market is on the mend. Another report today showed consumer spending in the U.S. stagnated in June as Americans used the biggest gain in incomes in three months to boost savings. Other data may show confidence among U.S. consumers dropped in July for a fifth consecutive month.
The gain in U.S. stocks since June has coincided with a drop in short interest and a weakening measure of market breadth, a combination that suggests the rally may not last, according to Bank of America Corp.
Short interest, or the total number of shares borrowed and sold by investors betting on declines, fell 3.9 percent from a nine-month high of 19.7 billion in June through July 13, according to twice-monthly data compiled by Bloomberg from the New York Stock Exchange and the Nasdaq Stock Market.
Fewer Participants
While the S&P 500 has jumped 8.4 percent since its June 1 low, fewer companies are participating in the rally. The cumulative advance-decline line for S&P 500 stocks, which represents the number of daily gains minus the number of declines, peaked on July 3. The benchmark index for American equities is up 0.8 percent from that date.
“The recent rally was more short covering than new demand,” Mary Ann Bartels, a New York-based technical analyst with Bank of America, wrote in a note yesterday. “The technical indicators confirm this with negative divergences in price momentum and market breadth. If these indicators do not shift more positively, a potential correction into September is still on the table.”
The S&P 500 has rallied 10 percent this year amid optimism central banks worldwide will continue efforts to spur growth and prevent Europe’s debt crisis from derailing the global recovery. The index capped a third straight weekly gain on July 27, the longest streak since March, amid speculation that the European Central Bank will buy bonds to ease borrowing costs for Spain and Italy.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
