U.S. stocks retreat while crude oil rallies, Treasuries advance

Earnings Season

Earnings at companies in the S&P 500 are projected to fall 1.7 percent in the third quarter in the first decline since 2009, according to analyst forecasts compiled by Bloomberg. Wagers that U.S. stocks will move in lockstep have dropped to a four-year low on speculation investors will focus on company results during earnings season.

The Chicago Board Options Exchange S&P 500 Implied Correlation Index has fallen 41 percent this year and reached 45.42 last week, the lowest level since October 2008, according to data compiled by Bloomberg. The gauge uses options to measure expectations about whether S&P 500 companies will move in unison.

The S&P 500 index closed yesterday at 1,455.88, less than 7 percent below the 2007 record. The measure has recovered after plunging 57 percent to a 12-year low on March 9, 2009, as the subprime mortgage crisis spread among financial firms. Consumer discretionary shares and financial firms, which advanced more than 150 percent, have led the gains.

Bank Performance

Banks, lenders and insurers are still down 55 percent since October 2007, more than three times any other industry, data compiled by Bloomberg show. Even after doubling, U.S. stocks are trading at 14.7 times earnings, about a 10 percent discount to their five-decade average ratio, data compiled by Bloomberg show.

Treasuries rose the most in three weeks as the U.S. sale of $32 billion in three-year notes met record demand after the International Monetary Fund cut its economic forecasts, boosting the appeal of the safest assets. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was a 3.96, topping the previous high last month of 3.94 and an average of 3.56 for the previous 10 sales. Existing three-year yields were little changed at 0.34 percent.

European banks fell 0.9 percent as a group and were the biggest drag on the Stoxx 600 among 19 groups. Nationalized Spanish lender Bankia dropped 9.8 percent as Expansion reported that parent company BFA will book losses of more than 4.5 billion euros ($5.8 billion) this year.

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