U.S. stocks retreat on Syria concern as Treasuries, crops gain

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.”

Central Banks

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.”

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