U.S. stocks retreat with gold, oil as euro strengthens

U.S. stocks fell for a second day as retailers posted results that disappointed investors while trade data fueled concern the Federal Reserve may begin to reduce its bond purchases this year. The euro gained as reports signaled European economies are recovering.

The Standard & Poor’s 500 Index lost 0.6% at 3:32 p.m. in New York while the Stoxx Europe 600 Index erased earlier gains to close down 0.4%. Ten-year Treasury notes pared losses, with yields up one basis point at 2.64%, as the U.S. sold $32 billion in three-year securities. The euro advanced 0.4% to $1.3307 while Australia’s dollar rose 0.7% to 89.88 U.S. cents. Oil decreased 1.2%, reversing earlier gains. Gold futures lost 1.5% for a sixth straight loss, the longest slump in 11 months.

The U.S. trade deficit narrowed more than forecast in June to the lowest level since October 2009 as crude oil imports declined and American companies shipped more goods abroad, causing Goldman Sachs Group Inc. and Barclays Plc to raise their estimates for second-quarter economic growth. Two Fed officials indicated today that reductions in central-bank stimulus were possible.

“You got the stock market back to all-time highs, so a prudent action is you sell the highs and buy the lows, and we’re a long way from the lows,” Tim Hartzell, who helps manage about $425 million as chief investment officer at Sequent Asset Management in Houston, said by phone. “We all have a fear of the third quarter and the third quarter could be a lot more volatile than traditionally given the politicized job interview for the Fed position.”

Fed Speakers

The S&P 500 extended its biggest two-day retreat since June. The index slipped 0.1% from a record yesterday after Dallas Fed President Richard Fisher said the central bank is closer to slowing $85 billion in monthly bond buying and warned investors not to rely on that stimulus. Atlanta Fed President Dennis Lockhart told Market News International that if economic growth and job creation pick up as expected, the Fed should proceed with the “removal” of its asset purchases.

Fed Bank of Chicago President Charles Evans, who has been among the strongest proponents of record monetary accommodation, said today he “would clearly not rule” out a decision to begin dialing back the purchases in September.

“We’ve seen good improvement in the labor market, there’s no question in my mind about that,” Evans said in a meeting with reporters in Chicago. “I’m still wanting to see greater evidence that it’s a sustainable improvement.”

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