U.S. Stocks Fall With Dollar, Treasuries on Fed Rate Bets
New York (Oct 29) U.S. stocks fell with the dollar and Treasuries, as investors bet the Federal Reserve will end its bond purchases and signal continued low interest rates. Oil rallied.
The Standard & Poor’s 500 Index (SPX) slid 0.2 percent at 12:33 p.m. in New York after yesterday rising to within 1.5 percent of an all-time high. The Stoxx Europe 600 Index closed 0.3 percent higher and the MSCI Asia Pacific Index added 1.3 percent. Facebook slid 6 percent after projecting sales that trailed analysts’ highest predictions. Brent crude rose to a two-week high on OPEC comments. Russia’s ruble retreated to a record low for a sixth day.
There’s only a 50 percent chance the Fed will raise its interest-rate target to at least 0.5 percent by October next year, after ending its bond-buying program today and leaving its key rate near zero, futures data and analyst forecasts compiled by Bloomberg show. The S&P 500 Index has rallied 6.6 percent through yesterday amid better-than-estimated earnings and signs of a strengthening economy. The dollar headed for its longest losing streak in four months.
“On the Wednesday of the Fed meeting leading up to the minutes, no one’s willing to make a big bet or dive in with both feet,” said Joe Quinlan, chief investment strategist at Bank of America Corp.’s U.S. Trust, which oversees about $380 billion. “Everybody knows and expects tapering to end, what the market’s focused on is the language of the forward guidance and when tightening starts.”
Fed officials are ending a two-day policy meeting today and will release a statement at 2 p.m. in Washington. Minutes from the last meeting, when the central bank pledged to keep interest rates low for a considerable time, revealed officials’ concern that U.S. growth may be at risk from a global slowdown.
Concerns that Europe will slip into a recession just as Fed bond buying ends sent the S&P 500 down 7.4 percent from an all-time high of 2,011.36 in mid-September through Oct. 15. The latest rally began after Fed Bank of St. Louis President James Bullard said policy makers should consider delaying the end of quantitative easing.
The yield on 10-year Treasury (USGG10YR) notes rose three basis points to 2.32 percent. Treasuries were holding onto their best monthly gain since January, on speculation the Fed will continue saying it’s appropriate to hold the target interest rate near zero for a “considerable time,” 80 percent of economists in a Bloomberg survey predicted.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, fell 0.1 percent, after touching the lowest level since Oct. 21. The gauge’s four-day losing streak is the longest since a five-day slump ended July 1.
Oil’s advance helped energy shares in the S&P 500 rally 0.6 percent to pace gains among the 10 main industries. Newfield Exploration Co. surged 13 percent after earnings topped estimates.
The Russell 2000 Index lost 0.7 percent after rallying 2.9 percent yesterday for its best day since 2012. Facebook helped the Nasdaq 100 Index lower by 0.5 percent.
In Europe, the Stoxx 600 climbed for a second day to the highest level since Oct. 7.
Total SA (FP) rose 2.6 percent after posting third-quarter net income that beat analysts’ estimates. Deutsche Bank AG declined 1.9 percent after Germany’s biggest lender swung to a loss in the third quarter. Air France-KLM Group slid 0.5 percent after quarterly profit fell. Sanofi dropped 4.4 percent after firing its chief executive officer.
Investors have also been watching U.S. corporate results. About 80 percent of S&P 500 companies that have posted quarterly earnings this season have topped analysts’ estimates for profit, while 60 percent beat sales projections, data compiled by Bloomberg show.
Facebook declined the most since April after predicting the slowest revenue growth since the first quarter of 2013. Gilead Sciences Inc. slid 1.5 percent after third-quarter profit missed estimates. U.S. Steel Corp. rallied 9.4 percent after reporting better-than-expected quarterly results.
“The economic outlook and earnings outlook still looks largely intact going forward and we’re seeing earnings come through not wildly exceeding expectations but exactly where we need them to be to drive equity markets,” Darrell Cronk, deputy chief investment officer at Wells Fargo Private Bank in New York, said by phone.
The MSCI Emerging Markets Index jumped 1.5 percent, taking its advance over two days to 3 percent, the most since November.
The Shanghai Composite Index (SHCOMP) rose for a second day, climbing 1.5 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong jumped 1.7 percent, recover losses since protesters and police clashed outside the government’s headquarters on Sept. 26.
The ruble weakened 0.9 percent to 42.8560 per dollar and bringing this month’s drop to 7.6 percent, the most among 24 developing nations.
The slide in the face of $24 billion of interventions is stoking speculation the Bank of Russia will accelerate its switch to a free float. The central bank, which plans to stop managing the ruble in 2015, is scheduled to meet Oct. 31.
The Bloomberg Commodity Index (BCOM) gained 0.7 percent for a third day of gains as industrial metals from nickel to aluminum advanced.
Brent crude rose to a two-week high after OPEC’s Secretary-General said the recent plunge in prices doesn’t reflect the balance between supply and demand. West Texas Intermediate oil rose 0.8 percent to $82.08 a barrel.
Both grades are rebounding after falling more than 20 percent from this year’s high in June.
Gold for December delivery fell 0.4 percent to $1,225 an ounce in New York. Silver dropped 0.2 percent to $17.26 an ounce.