U.S. stocks fluctuate as bonds slip on earnings, Fed speculation

U.S. stocks fluctuated as investors weighed corporate earnings while Treasuries declined for the first time in three days amid speculation on when the Federal Reserve may scale back its asset purchases.

The Standard & Poor’s 500 Index fell 0.1% at 2:34 p.m. in New York and the Stoxx Europe 600 Index slumped 0.3% as both gauges erased earlier advances. The MSCI Emerging Markets Index rose 1.7% to a six-week high amid optimism over China’s economic growth. The yield on 10-year Treasuries increased three basis points to 2.51%. Volatility measures in stocks, bonds and currency markets touched the lowest levels in about two months. Corn tumbled to a 33-month low on forecasts for cool, wet weather.

Apple Inc. and AT&T Inc. are among 36 companies in the S&P 500 set to report results today. An index of manufacturing in the mid-Atlantic region of the U.S. unexpectedly contracted in July. Chinese Premier Li Keqiang said the slowest economic growth policy makers will tolerate is 7%, Beijing News reported today.

“What you’re seeing is revenues are coming in pretty lackluster and profits seem to be doing a little better than gains in sales,” Hank Herrmann, Overland Park, Kansas-based chief executive officer of Waddell & Reed Investment Management Co., said by phone. His firm manages $104 billion. “The market had a period of digesting the confusion over Fed tapering. For the moment, it’s focused on individual company fundamentals.”

Of the 130 companies in the S&P 500 to have already posted earnings for the quarter, 71% have beat analysts’ profit estimates, data compiled by Bloomberg show. About 52% have surpassed forecasts for revenue.

Netflix, UPS

Netflix Inc. slid 4.4% after fewer subscribers signed up for its service than analysts had forecast. Travelers Cos., the second-largest U.S. commercial insurer, tumbled 3.5% as book value had the biggest quarterly decline since 2008 as higher interest rates pressured its bond portfolio. Texas Instruments Inc. rose 4.1% after forecasting third- quarter sales and profit that may exceed forecasts.

United Technologies Corp. gained 3.3%, leading the Dow Jones Industrial Average to a record high, as the company boosted the lower end of its 2013 profit forecast. United Parcel Service Inc. was little changed as second-quarter profit fell 4% after the world’s largest package-delivery company lowered its full-year forecast earlier this year.

Fed stimulus and corporate earnings have helped fuel a surge in stocks worldwide, with the S&P 500 jumping as much as 151% from its March 2009 low. Benchmark indexes have reached record highs after Fed Chairman Ben S. Bernanke said last week the central bank remains flexible about the duration of its asset-purchase program.

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