U.S. stocks fell, erasing earlier gains, as Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons. Treasuries held onto earlier gains triggered by a drop in durable goods orders, while crops led commodities higher.
The Standard & Poor’s 500 Index decreased 0.4% to 1,658.08 at 3:52 p.m. in New York. The yield on 10-year Treasuries dropped 2.6 basis points to 2.79% while the S&P GSCI Index of 24 raw materials touched a one-month high, with corn and soybeans surging as hot, dry weather in the Midwest threatened to reduce crop harvests. Turkey’s lira slid as much as 0.6% to a record against the dollar and India’s rupee sank 1.5%.
The S&P 500 was up as much as 0.4% earlier and turned lower as Kerry said President Barack Obama will make an “informed decision” and hold Syria’s government accountable for the “moral obscenity” of using chemical weapons against its people. Economic data this morning showed durable goods orders in the U.S. fell in July for the first month since March, triggering speculation the Federal Reserve will not commit to a large-scale reduction in stimulus efforts.
“If there’s going to be turmoil and then if there’s going to be some retaliation and affect U.S. assets, people get a little scared,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview. “It’s a bit of a pullback so people are probably taking some risk off the table.”
Stocks, bonds and commodities have been whipsawed since May, when Fed Chairman Ben S. Bernanke first signaled the prospect of cuts to stimulus should the economy and job market continue to improve. The Fed will probably pare its $85 billion a month in bond purchases at its Sept. 17-18 meeting, according to 65% of economists surveyed by Bloomberg Aug. 9-13.
European Central Bank Governing Council members Panicos Demetriades and Ewald Nowotny split over whether scope remains for further interest-rate cuts, while three regional Fed presidents differed over the timing for reducing bond buying as central bankers met over the weekend in Jackson Hole, Wyoming.
The ECB still can’t rule out lowering the benchmark rate from the record low of 0.5%, Bank of Cyprus Governor Demetriades said in an Aug. 24 interview. Bank of Austria Governor Nowotny said on Aug. 22 that he doesn’t see “many arguments now for a rate cut” after the recent “stream of good news.”
The S&P 500 advanced 0.5% last week, halting a two week slide. Bookings for goods meant to last at least three years decreased 7.3% last month, the most since August 2012, after a 3.9% gain in June, the Commerce Department said today. The median forecast of economists surveyed by Bloomberg called for a 4% drop.
“It’s another data point that indicates a slow recovery,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone. “This is all pointing towards less tapering by the Fed, which is probably bullish for the stock market in general.”
Among stocks moving today, Onyx Pharmaceuticals Inc. jumped 5.6% after Amgen Inc. agreed to acquire the cancer- treatment developer in a $10.4 billion transaction. Tyson Foods Inc., the largest U.S. meat processor, fell 7.1% after Bank of America Corp. analysts cut their rating on the stock.
Facebook Inc. rallied for a third day, gaining 1.7% and sending its market value above $100 billion amid optimism the world’s largest social network can bolster sales from mobile advertising.
Price gains of stocks in the S&P 500 are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since 1946. The benchmark gauge for U.S. equities has risen 14% relative to income over the past 12 months to 16 times earnings, according to data compiled by Bloomberg. Valuations last climbed this fast in the final year of the 1990s technology bubble, just before the index began a 49% tumble.
About two shares declined for each that gained in the Stoxx Europe 600 Index, while the gauge closed little changed amid volume 57% lower than the 30-day average. U.K. markets were shut for a holiday.
Royal KPN NV increased 3% in Amsterdam after winning the support of minority shareholder America Movil SAB for the sale of its German business to Telefonica Deutschland Holding AG after the acquirer agreed to sweeten its bid.
The MSCI Emerging Markets Index was little changed after slumping 2.7% last week. About $1.4 trillion has been erased from the value of emerging-market equities since Bernanke said May 22 that policy makers could scale back bond buying.
Soybeans gained 4.6% and corn rallied 6.5%.
Temperatures will average as much as 14 degrees Fahrenheit above normal during the next seven days, with little rain expected in the Midwest, T-Storm Weather LLC said in a note to clients today. Rainfall in July and August will be the least since 1936 in Iowa, Illinois and Indiana. Soybean yields will be 1.8% lower than the government forecast Aug. 12, Professional Farmers of America said Aug. 23, after a tour of more than 2,600 fields in seven states last week.
West Texas Intermediate crude lost 0.5% to $105.92 a barrel following the durable goods report and as Libya restarted exports from a previously closed port. Gold increased 0.3% to $1,401.64 an ounce while silver added 0.7% at $24.24 an ounce.
The U.S. currency was stronger against 10 of 16 major peers and the Bloomberg U.S. Dollar Index, a gauge of the greenback versus 10 counterparts, increased 0.1%.
Thirty-year Treasury yields, which reached a two-year high last week, fell two basis points to 3.77%. Two-year rates lost one point to 0.36%.
As the U.S. bond market suffers its worst rout since 2009, the gauge that historically signals more pain for fixed-income investors is instead suggesting yields are near their peak.
The gap between two- and 10-year Treasury yields widened to 2.55 percentage points this month, double the median of 1.23 points since 1990 and approaching the record 2.93 points in February 2010, data compiled by Bloomberg show. The yield curve is steepening at the fastest pace since 2009 as the Fed signals its intent to keep the target interest rate for overnight loans between banks at about zero into 2015 while reducing the bond- buying economic stimulus that drove 10-year yields to the highest level in more than two years.
Italian 10-year yields rose five basis points to 4.38% and Spain’s rate was little changed at 4.46%.