U.S. stocks fluctuated between gains and losses and Treasuries were little changed as investors analyzed earnings and economic data for clues on the Federal Reserve’s stimulus plans. The yen strengthened.
The Standard & Poor’s 500 Index rose 0.1% at 1:42 p.m. in New York, erasing an earlier drop of as much as 0.4%. The yield on 10-year Treasury notes was at 2.60% after weaker-than-average demand from the latest auction. The Stoxx Europe 600 Index slumped 0.5% amid disappointing earnings after reaching an almost eight-week high yesterday. The yen climbed versus all except one of its 16 most-traded peers.
Facebook Inc. posted revenue and profit that beat analysts’ estimates while BASF SE, the world’s biggest chemical maker, reported earnings that missed forecasts. Newmont Mining Corp. and Amazon.com Inc. are among companies set to report earnings today. U.S. durable goods orders increased more than forecast in in June, according to Commerce Department data, while jobless claims rose in the latest week.
After record highs, “we seem more inclined to sink back into what may be a trading range,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “We are kind of stuck in that middle ground where data is not bad enough to be encouraging about more quantitative easing, but it’s not good enough to convince people that there is enough there fundamentally to justify sharply higher prices.”
The S&P 500 declined the most in a month yesterday, after climbing to within 3 points of 1,700 for a third straight day, as housing and manufacturing data fueled speculation the Fed may reduce its asset-buying this year and investors weighed earnings reports from Apple Inc. to Caterpillar Inc.
Support from central banks and better-than-estimated corporate earnings have driven the S&P 500 up as much as 151% from its March 2009 low to record highs. The Fed has said economic data will determine the timing and pace of any reduction in its $85 billion in monthly bond-buying. The Fed will start trimming purchases in September, according to a Bloomberg survey of economists.
Bookings for goods meant to last at least three years increased 4.2% after a revised 5.2% gain in May that was bigger than initially reported, the Commerce Department said today. The median forecast of 79 economists surveyed by Bloomberg called for a 1.4% advance. A separate report showed initial jobless claims rose in the week ended July 20 while continuing claims declined.
Facebook surged 27% today as the operator of the world’s most popular social-networking service reported sales and profit that exceeded estimates. Visa Inc. advanced 4.8% as profit topped forecasts. PulteGroup Inc. fell 11% after costs to settle a contractual dispute led to a drop in earnings. D.R. Horton Inc. slid 8.9% as order growth missed analysts’ estimates.
Of the 233 companies in the S&P 500 that have posted quarterly results so far, 74% have exceeded analysts’ profit estimates and 57% have topped sales projections, data compiled by Bloomberg show.
“Valuations have moved faster than the underlying earnings,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $130 billion, said by telephone. “You’ve had a willingness by investors to take on more risk without compensatory more earnings. In the long run in order to sustain higher prices, you need higher earnings.”
Equity valuations have climbed 16% this year, with the S&P 500 trading at 16.3 times reported earnings, close to the highest level since May 2010, data compiled by Bloomberg show.
The Stoxx Europe 600 Index slipped 0.5%. The volume of shares changing hands in Stoxx 600 companies was 18% less than the 30-day average, according to data compiled by Bloomberg.
BASF lost 4.5% as it said meeting its targets looked difficult, while Orange SA, France’s former phone monopoly, dropped 3.2% after posting an 8.5% drop in earnings. Michelin & Cie., Europe’s largest tiremaker, sank 1.4% after reporting a 13% decline in first-half profit. Roche Holding AG advanced 0.6% as the maker of cancer drugs reported earnings that exceeded estimates.
Treasuries were little changed after the U.S. sale of $29 billion in seven-year notes. The notes drew a yield of 2.026%, the highest since July 2011. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.54, the lowest since May 2009, compared with an average of 2.65 for the past 10 sales.
The yield on the current seven-year note increased 1 basis point to 2%. Treasury 10-year yields rose 1 basis point to 2.60%, after earlier reaching the highest level in more than a week following the report on durable goods.
The MSCI Emerging Markets Index fell for a second day, slipping 0.5%. The Shanghai Composite Index lost 0.6%, Russia’s Micex Index slid 0.5% and India’s Sensex declined 1.4%. Turkish stocks dropped for a sixth day, the longest losing streak in seven weeks, retreating 0.2%.
The Japanese yen strengthened for the first time in three days against the euro, rising 0.4%, and increased 0.8% to 99.52 per dollar. The euro advanced 0.3% to $1.3246.
New Zealand’s dollar climbed at least 1% against all 16 of its major counterparts. Reserve Bank Governor Graeme Wheeler said a removal of monetary easing “will likely be needed in the future.” The kiwi gained 1.8% to 80.76 U.S. cents.
The pound increased 0.3% to $1.5366 as a report showed Britain’s economy grew 0.6% in the second quarter, with all main industries showing expansion for the first time in three years.
German bund yields rose three basis points to 1.67%. Data showed German business confidence rose for a third month in July. The Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 106.2 from 105.9 in June. Economists predicted an increase to 106.1, according to the median of 45 forecasts in a Bloomberg News survey.
The cost of insuring against losses on corporate bonds rose, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies increasing 3.2 basis points to 103.31 basis points.
The average yield investors demand to hold speculative- grade corporate bonds in euros fell to 4.75% yesterday, the lowest since June 4. The rate for investment-grade securities rose 5 basis points to 2.03%, the highest since July 5, Bloomberg index data show.