Stocks slipped before the start of earnings season, pulling the Standard & Poor’s 500 Index down from a five-year high, and the Dollar Index fell for the first time in four days. European banks rose as regulators eased liquidity rules while Italian bonds slid.
The S&P 500 dropped 0.6 percent to 1,457.79 and the Stoxx Europe 600 Index (SXXP), which closed last week at its highest level since February 2011, fell 0.4 percent at 12:58 p.m. in New York. BNP Paribas SA and Barclays Plc paced ban gains in Europe. The yen advanced against all 16 major peers, adding 0.6 percent versus the U.S. currency, while the Dollar Index retreated from the highest level since November. Treasuries and commodities were little changed.
Traders work on the floor of the New York Stock Exchange (NYSE). Photographer: Scott Eells/Bloomberg
Alcoa Inc. will unofficially start the U.S. earnings reporting season after the market closes tomorrow, with analysts predicting 2.9 percent growth in fourth-quarter profit for S&P 500 companies. Photographer: Stephen Morton/bloomberg
The yen rose 0.4 percent to 87.81 per dollar after touching 88.41 last week, the weakest since July 2010. Photographer: Akio Kon/Bloomberg
Alcoa Inc. (AA) will unofficially start the U.S. earnings reporting season after the market closes tomorrow, with analysts predicting 2.9 percent growth in quarterly profit for S&P 500 companies. European Central Bank President Mario Draghi’s Governing Council will meet Jan. 10 to focus on nursing the euro region back to economic health.
“We’ve come a long way in a very short time,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, in a phone interview. “I’m expecting better-than-anticipated earnings. Yet we need to see some consolidation first.”
Market Leaders
Utilities, energy and consumer companies led losses in nine of the 10 main industry groups in the S&P 500 today. Illumina Inc. tumbled 7.3 percent after Roche Holding AG Chairman Franz Humer told a Swiss newspaper that a deal to buy the U.S. genetics company is off the table. Applied Materials Inc., the world’s largest producer of chipmaking equipment, lost 2.1 percent after being downgraded at JPMorgan Chase & Co.
Boeing Co. tumbled 2.1 percent after a 787 Dreamliner operated by Japan Airlines Co. caught fire on the ground this morning at Boston’s Logan International Airport.
Bank of America Corp., the second-biggest U.S. bank by assets, slipped 0.5 percent after agreeing to pay Fannie Mae$3.6 billion to resolve home-loan repurchase claims. The lender will also pay $6.75 billion to repurchase residential mortgages sold to Fannie Mae. The deal will “substantially resolve outstanding claims for compensatory fees” between the two companies, according to the statement.
Earnings at banks and diversified financial companies are forecast by analysts to have grown 28 percent and 71 percent, respectively. Earnings at insurance companies fared the worst among 24 groups, decreasing 48 percent amid claims from Superstorm Sandy, according to analyst estimates compiled by Bloomberg.
Weekly Rally
Stocks surged last week, sending the S&P 500 up 4.6 percent for its biggest gain in 13 months, after U.S. President Barack Obama and lawmakers reached a compromise that averted the package of spending cuts and tax increases known as the fiscal cliff.
Fed Vice Chairman Janet Yellen said on Jan. 5 that communication of policy aims plays a “big role” in supporting the economy now that the central bank’s benchmark interest rate is close to zero. Fed Bank of Philadelphia President Charles Plosser said the same day that the central bank should take the steps necessary to ensure inflation stays near its goal of 2 percent.
Almost two shares fell for each that gained in the Stoxx 600 today as energy and utility companies contributed the most to the decline in the index. A gauge of banks advanced 1.8 percent, trading at a 17-month high, as BNP Paribas climbed 1.9 percent and Barclays increased 3.8 percent.
Basel Rules
Central bankers meeting yesterday in Basel, Switzerland, allowed lenders to use a wider range of assets to meet the so- called liquidity coverage ratio amid warnings the proposal would strangle lending and stifle the economic recovery.
The cost of insuring against default on bank debt fell, with the Markit iTraxx Financial index of credit-default swaps dropping four basis points to 121
Japan’s currency strengthened 0.6 percent to 87.68 yen per dollar after touching 88.41 on Jan. 4, the weakest level since July 2010. The yen’s relative strength index versus the dollar slid to 15.5 on Jan. 4, the least since December 2001 and below the 30 level that traders view as a signal that an asset’s price has fallen too fast. The yen added 0.2 percent against the euro. Europe’s 17-nation currency increased 0.3 percent to $1.3108.
Debt Sales
Italy’s 10-year bond yield rose eight basis points to 4.35 percent and the rate on similar-maturity Spanish debt climbed six basis points to 5.11 percent. Spain plans to sell bonds on Jan. 10 and Italy will auction securities the following day.
Silvio Berlusconi’s People of Liberty party reached an agreement with the Northern League to run together in Italy’s February elections, the former prime minister said today on RTL radio. The Northern League, which served in all three of Berlusconi’s governments, opposed his candidacy for premier.
Benchmark 10-year Treasury yields were little changed at 1.89 percent.
Economists cut their forecasts for Treasury yields in 2013 to the least since Bloomberg began compiling the predictions as jobs data tempered speculation the Federal Reserve will stop buying bonds this year. Ten-year yields will be 2.14 percent by Dec. 31, according to a survey of banks and securities companies as of Jan. 4, with the most recent projections given the heaviest weightings. It’s the lowest level based on Bloomberg data that start in July.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) fell 0.2 percent, after seven straight weeks of gains, the longest stretch since October 2010. Brazil’s Bovespa sank 0.9 percent and India’s Sensex lost 0.5 percent. China’s CSI 300 Index (SHSZ300) advanced 0.5 percent, entering a bull marketafter rallying more than 20 percent from 2012’s low.
The S&P GSCI Index of 24 commodities drifted between gains and losses as coffee, cocoa and gas oil rallied more than 0.9 percent, while lead, natural gas and zinc dropped at least 0.9 percent to lead declines. Oil was little changed at $93.15 a barrel, after gaining 2.5 percent last week. Copper declined for a third day.
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