Global stocks fell amid losses in industrial metals and disappointing earnings from Bank of America Corp. and others. The euro weakened as Germany’s central bank chief Jens Weidmann reportedly said European policy makers may cut rates if needed.
The Standard & Poor’s 500 Index fell 1.3% to 1,554.41 at 3:17 p.m. in New York. The Stoxx Europe 600 Index sank 1.5% for a fourth straight decline, its longest losing streak since January, and Germany’s DAX index slid 2.3% to erase its gain for the year after European auto sales reached a 20-year low. The euro weakened 1.1% to $1.3034 and fell against 14 of 16 major peers. Copper sank 3% in London and tin and lead sank more than 2%. Gold for immediate delivery rose 0.5% to $1,374.61 an ounce while futures on the metal declined.
Bank of America led financial shares lower after shortfalls in mortgage banking and trading marred first-quarter results. Industrial metals declined after the International Monetary Fund lowered its forecast for economic growth in China yesterday. The Federal Reserve said the U.S. economic expansion remained “moderate” amid gains in manufacturing, housing and autos that offset weakness in defense-related industries in some regions, according to its Beige Book business survey.
“There’s been a pattern in earnings where you see a slowing down in improvement,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $130 billion, said by telephone. “Stocks need to pause as investors recognize that forward-looking estimates are too high and need to come down or we need to see a genuine improvement in the economy to justify where stocks are today.”
U.S. equities began short-term declines in April for the last three years. The S&P 500 fell 9.9% between April 2 and June 1 of last year and peaked on April 29, 2011, before a 19% slide ending that October. The index tumbled 16% from a high in April 2010 to July 2 of that year.
The market may be due for a similar pullback this year because its advance since mid-November has been “out of sync” with weak earnings and slower economic growth, UBS AG strategist led by Jonathan Golub wrote in a report.
“While we’re not inclined to invest based on some simple rule or rhyme, those investors who followed the old adage ‘Go Away in May’ have done quite well in each of the past three years,” UBS said in the report dated April 16. “We believe that another spring break is likely to materialize and that now is a good time to begin dialing back on risk.”
The S&P 500 erased most of yesterday’s 1.5% rally and extended its retreat from a record on April 11 to about 2.5%.
Bank of America lost 4.7% to lead the KBW Bank Index down almost 2%. Textron Inc. slumped 14% after lowering its forecast for business-jet sales. Caterpillar Inc. slid 1.5% after Macquarie Group Ltd. cut its rating on the shares to neutral. Apple Inc. slid 5.6% to the lowest price since December 2011 after its audio-chip supplier, Cirrus Logic Inc., predicted that sales would miss estimates because of unsold inventory. Cirrus Logic slid 16%.
Some 16 members of the S&P 500 are reporting earnings today, including American Express Co. and EBay Inc. after the close of trading. Analyst predict earnings decreased 1.4% in the period, the first year-over-year decline since 2009, according to estimates compiled by Bloomberg. Earnings beat estimates at 69% of the 55 companies in the S&P 500 that reported results so far while 51% topped revenue estimates, according to data compiled by Bloomberg.
‘Driving the Bus’
Stocks fell to their lows of the session after the White House said a letter addressed to President Barack Obama containing a substance that the FBI said was positive for the poison ricin in preliminary testing was intercepted today, a day after a tainted letter targeted a U.S. senator. The letters fueled concern about terrorism following the April 15 bombings at the Boston Marathon.
“Are the ricin incidents worth a point or two of this selloff? Probably, but it’s not driving the bus,” Mike Shea, a managing partner at New York-based brokerage firm Direct Access Partners LLC, said in an interview.
The Stoxx 600’s retreat extended the drop over the past four days to 3.8%, its worst plunge since July. A gauge of European mining shares retreated 2.4% to the lowest since 2009 on a closing basis as BHP Billiton Ltd. and Rio Tinto Group slid more than 3%.
The DAX index tumbled more than 2% in 25 minutes during the first hour of trading. Some 14,000 DAX Index futures contracts expiring in June changed hands in a five minute period about 9:50 a.m. in Frankfurt today, more than 15 times the 20- day average volume for that time of day, according to data compiled by Bloomberg.
Bayerische Motoren Werke AG and Volkswagen AG lost more than 2.7% as a gauge of automakers posted the biggest drop on the Stoxx Europe 600 Index. Bayer, Germany’s largest drugmaker, retreated 4.3% after a U.S. court ruled that its patent to produce the birth-control pill Yaz was invalid.
European car sales slid to a 20-year low last month. Registrations in March fell 10% to 1.35 million vehicles, their 18th consecutive monthly decline, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said in a statement. First-quarter deliveries in the region dropped 9.7% to 3.1 million cars.
ASML Holding NV rallied 2.5%, paring a gain of as much as 9.4%, as Europe’s largest semiconductor-equipment supplier announced a buyback of as much as 1 billion euros of shares and first-quarter profit that beat estimates.
The euro extended losses versus the yen and dollar after Dow Jones reported Bundesbank President Jens Weidmann said the European Central Bank may cut interest rates if new information warrants the move.
Italy’s borrowing costs dropped to near the lowest in three months, with 2-year yields losing six points to 1.38%. The yield on Slovenia’s 2022 dollar bonds sank 48 basis points to 5.83%. Slovenia, the first post-communist nation to adopt the euro, sold 1.1 billion euros ($1.4 billion) of 18- month bills, more than double the amount planned
The G-20 finance ministers and central bankers meet for two days from tomorrow in Washington before International Monetary Fund and World Bank talks. New York Fed President William C. Dudley and his Chicago counterpart Charles Evans stressed the need for stimulus yesterday.
Copper, crude oil and gasoline lost more than 2% to lead commodities lower. Oil prices dropped as much as 3% after the Energy Information Administration said output climbed to 7.2 million barrels a day, the most since July 1992, and gasoline and diesel demand decreased. BNP Paribas SA cut its 2013 forecasts for Brent and WTI.
Spot gold rebounded for a second day after falling 9.1% two days ago, the most in three decades. Gold futures for June delivery fell 0.6% to $1,379.90 an ounce.
Investors are dumping gold funds at the fastest pace in two years in favor of equities, compounding a slump that has wiped $560 billion from the value of central bank reserves.
Exchange-traded products linked to gold dropped $37.2 billion in 2013 as the metal reached a two-year low yesterday. Gold funds suffered net outflows of $11.2 billion this year through April 10, the most since 2011, while global and U.S. equity funds had net inflows of $21.25 billion, according to Cambridge, Massachusetts-based EPFR Global.
Central banks are among the biggest losers because they own 31,694.8 metric tons, or 19% of all the gold mined, according to the World Gold Council in London. After rallying for 12 straight years, the metal has tumbled 28% from its September 2011 record of $1,923.70 an ounce.
Carbon permits under the European Union’s emissions-trading system slipped 11% to 2.75 euros a metric ton in London. The December 2013 carbon contract plunged 35% yesterday, the most on record, after lawmakers rejected an emergency plan to address a surplus of allowances.
The Swedish krona weakened after policy makers pushed back the timing of likely interest-rate increases. The krona slid to its weakest level since February against the euro, dropping as much as 1.3%. Sweden’s central bank left its benchmark interest rate unchanged for a second meeting and delayed tightening to the second half of 2014 after the appreciation of the currency brought inflation to standstill.
The MSCI Emerging Markets Index slipped 0.9%, reversing earlier gains of as much as 0.4%. Brazil’s Bovespa sank almost 2%.