Stocks recover as Treasuries gain, dollar falls

S&P edges higher...

Stock index, chart, technical analysis Stock index, chart, technical analysis

U.S. stocks erased losses in the final hour of trading as Apple Inc. rebounded from a six-week low, helping the market recover from a drop triggered by concern about Spain’s finances. Treasuries rose and the dollar fell.

The Standard & Poor’s 500 Index added less than 0.1 percent to close at 1,445.75 after retreating 0.4 percent in early trading. Ten-year Treasury yields decreased one basis point to 1.62 percent, declining for the 11th time in 12 days. The Dollar Index slipped for a second day, with the euro up 0.3 percent at $1.2920. Australia’s currency weakened at least 0.7 percent against all 16 major peers after the central bank cut its benchmark interest rate to the lowest since 2009.

Apple, the world’s largest company by market value, reversed its loss in the final hour of the session after briefly dipping below a technical level watched by traders as a potential buying opportunity. Stocks turned lower earlier after Spanish Prime Minister Rajoy said he has no plans to request rescue funds in the near term, defying market speculation that the nation would ask for a bailout which would pave the way for the European Central Bank to buy its debt.

“Spain took down the market, but people looked past it and found some good entry points in technology stocks,” Frank Ingarra, who helps manage $1.4 billion at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. “Apple is such a big part of the market and it’s been on a downtrend for a couple of days, so it makes sense for the stock to get some relief and rebound which would translate into the indexes.”

Market Leaders

Apple rose $1.92, or 0.3 percent, to $661.31. The stock rebounded after 3 p.m. after dropping as much as 1.3 percent to $650.65, below its average price from the past 50 days. The shares, which slumped 4.7 percent last week after sales of the iPhone 5 started, contributed the most to the S&P 500’s rebound in the final hour, according to data compiled by Bloomberg. Technology companies in the S&P 500 reversed a 0.7 percent retreat to end the session up 0.1 percent.

Health-care, utility and financial shares led gains among 10 groups, while commodity producers and consumer-discretionary stocks fell the most.

Chipotle Mexican Grill Inc. slid 4.2 percent after hedge fund manager David Einhorn recommended betting against the restaurant chain. Mosaic Co. dropped 3.9 percent after reporting earnings that missed estimates. Citigroup Inc. increased 1.6 percent as its rating was raised by KBW. MetroPCS Communications Inc. rallied 18 percent as Deutsche Telekom AG was said to be nearing a deal with the wireless carrier.

MSCI Plunges

MSCI Inc. fell the most on record after being dropped as benchmark provider for 22 index funds by Vanguard Group Inc., the largest U.S. mutual-fund company. MSCI declined 27 percent, the most since it went public in November of 2007, after Vanguard said funds with about $537 billion in assets will replace New York-based MSCI to cut costs for fund shareholders.

Investors are proving skeptical that the Federal Reserve’s announcement of additional quantitative easing will get Americans to spend more.

The Consumer Discretionary Select Sector SPDR Fund -- which includes Amazon.com Inc. and Macy’s Inc. -- has lagged behind the Consumer Staples Select Sector SPDR Fund by 2.8 percent since Sept. 14, the day after the Fed unveiled plans to buy mortgage-backed securities at a pace of $40 billion a month until the labor market improves. During the preceding six weeks, the discretionary exchange-traded fund outpaced its defensive counterpart, which includes Procter & Gamble Co. and Coca-Cola Co., by 9.2 percent.

European Markets

Rajoy’s remarks followed the close of European markets, where Spanish bonds and stocks rallied in anticipation of a bailout request that would pave the way for the European Central Bank to buy the nation’s debt.

The Stoxx Europe 600 Index slipped 0.3 percent. PostNL NV, the Dutch mail service with operations in the U.K., Germany and Italy, jumped 4.4 percent after saying it will raise postage stamp rates in 2013.

Banks in the index declined 0.6 percent as a group. Spain’s banks face a capital shortfall that could climb to 105 billion euros ($135 billion), almost double the estimate the government provided last week, according to Moody’s Investors Service.

Spanish registered unemployment rose for a second month in September amid a worsening recession. The number of people registering for jobless benefits increased 79,645 from August to 4.7 million, according to data released today by the Labor Ministry in Madrid. That compares with an increase of 95,817 in the same month last year.

Rajoy Speaks

Asked at a press conference in Madrid today if a bailout request was imminent, Rajoy said: “No.” Rajoy is weighing the terms of a Sept. 6 proposal by the ECB president to buy bonds of cash-strapped nations including Spain if they make for a formal aid request from the euro region’s government-run rescue funds. Reuters news agency yesterday reported that Spain is ready to seek a bailout as soon as this weekend.

“This continues to show the fact markets remain much headline driven,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion in assets. “Rajoy’s comments today really shouldn’t come as any surprise to the market. It seems very consistent with what he reiterated over the last several weeks,” he said. Early declines were “probably a little bit of over-reaction from the market.”

Alstom SA plunged 4.9 percent after Europe’s second-largest power-equipment maker sold 350 million euros ($452 million) of stock to help finance an acquisition it announced in 2009. Erste Group Bank AG slipped 2.8 percent after the Austrian bank’s largest shareholder sold a 235 million-euro stake.

Next page: European Yields, Emerging Markets

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