S&P 500 drops as Treasuries rise

The Standard & Poor’s 500 Index (CME:SPM14) dropped with emerging-markets and Treasuries rose as reports showed an unexpected decline in new-home sales and weakness in Chinese and American manufacturing. Copper retreated.

The Standard & Poor’s 500 slipped 0.3 percent at 10:06 a.m. in New York, after completing its longest winning streak since September. The MSCI Emerging Markets Index slid 0.6 percent as a gauge of Chinese shares in Hong Kong dropped to the lowest level this month. The Stoxx Europe 600 Index lost 0.6 percent. The yield on 10-year Treasuries fell 2 basis point to 2.69 percent. Copper retreated 0.4 percent. The Aussie dropped 1 percent versus the dollar. The euro strengthened 0.2 percent to $1.3827 after the region’s services and manufacturing grew more than forecast.

Sales of new U.S. homes unexpectedly plunged in March to the lowest level in eight months. Manufacturing in Asia’s largest economy is contracting for a fourth month, according to a preliminary survey from HSBC Holdings Plc and Markit Economics Ltd. A U.S. factory index dropped more than forecast. Ukraine said it’s resuming operations to oust militants from eastern cities while Russia pledged to defend its citizens in the neighboring country. Apple Inc. and Facebook Inc. are among companies releasing earnings today.

“These next few days are the most important of the earnings season as some big bellwethers report,” Heinz-Gerd Sonnenschein, an equity market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. “Earnings have not been great this quarter. Expectations had already been brought down quite dramatically and profit growth is weak year-on-year. The S&P 500 is holding up, but investors will need more of a signal to start buying into the market.”
 

Earnings Season

The S&P 500 advanced 3.5 percent in the past six days, closing 0.6 percent away from a record high, as earnings from Netflix Inc. to Citigroup Inc. topped estimates and Federal Reserve Chair Janet Yellen reiterated the bank’s commitment to supporting the economy.

AT&T slipped 3.9 percent today after maintaining its forecast for earnings growth. Amgen Inc. dropped 2.7 percent after sales for its best-selling arthritis drug missed analysts’ estimates. Yum! Brands Inc. climbed 2.4 percent as first-quarter earnings exceeded projections and sales rose in China. Boeing added 2.1 percent after a boost in jetliner deliveries helped profit top forecasts.

Of the 139 companies that have reported results this season, 75 percent have beaten analysts’ estimates and 50 percent topped sales projections, data compiled by Bloomberg show. Profit for S&P 500 companies probably increased 0.7 percent in the first quarter, analysts estimated. They had predicted a 6.6 percent gain at the beginning of this year.
 

iPhones, iPads

Apple shares have sunk 5.2 percent this year as the company is testing Wall Street’s patience with its slowing iPhone and iPad sales. Revenue is projected to be flat for the first time in at least a decade, according to data compiled by Bloomberg. Profit is also estimated to decline 5 percent, making it the sixth consecutive period with little to no gains.

Greenlight Capital Inc., the $10.3 billion hedge-fund firm run by David Einhorn, said it was betting against a group of technology stocks as evidence grows of a bubble.

“There is a clear consensus that we are witnessing our second tech bubble in 15 years,” the New York-based firm said in a letter to clients yesterday. “The current bubble is an echo of the previous tech bubble with fewer larger capitalization stocks and much less public enthusiasm.”

U.S. home sales dropped 14.5 percent to a 384,000 annualized pace, lower than any forecast of economists surveyed by Bloomberg and the weakest since July, Commerce Department data showed today in Washington. The median forecast of 74 economists surveyed by Bloomberg News called for the pace to accelerate to 450,000.

 

Factory Report

The Markit Economics preliminary U.S. manufacturing index decreased to 55.4 in April from a final reading of 55.5 a month earlier, the London-based group said today. A reading above 50 for the purchasing managers’ measure indicates expansion. The median forecast in a Bloomberg survey of 19 economists was 56, with estimates ranging from 54.5 to 57.

In China, the so-called flash purchasing-managers index came in at 48.3 for April from 48 in March, in line with economists’ predictions. China is the biggest trading partner for most Asia-Pacific countries.

“A slowdown in China raises more uncertainty that would lead to less funds flow,” said Robert Ramos, who helps manage about $900 million as chief investment at Union Bank of the Philippines. “Ukraine is adding to the uncertainty.”

 

China Manufacturing

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 1.3 percent to the lowest close since March 27. The Shanghai Composite Index dropped 0.3 percent.

Russia’s Micex Index fell 0.6 percent, extending declines since President Vladimir Putin’s intervention in Crimea at the start of March to 8.1 percent. The hryvnia gained 1.8 percent versus the dollar.

An offensive is under way after its suspension for the Easter break, with security agencies seeking to eliminate all militias operating in Kramatorsk, Slovyansk and other cities, Ukraine’s First Deputy Prime Minister Vitali Yarema said.

Russian Foreign Minister Sergei Lavrov said his country is prepared to retaliate if its “legitimate interests” are “attacked directly,” drawing a parallel with its actions during a 2008 war over the Georgian breakaway region of South Ossetia.

 

Canceled Auction 

The government canceled the sale of ruble bonds because there were no bids at an acceptable price, the Finance Ministry said in statement on its website.

Copper dropped for the first time in four days to $6,644 a metric ton. China is the biggest buyer of the metal.

Dubai’s benchmark stock index rose 2.3 percent to the highest in almost six years.

The Stoxx 600 retreated after climbing 3.2 percent in the past three days. Trading volumes were 20 percent lower than the 30-day average, according to data compiled by Bloomberg.

Technology stocks fell the most today, led by a 7.1 percent decline in Ericsson AB. The world’s biggest maker of wireless networks reported quarterly sales that missed analysts’ estimates.

Scania AB lost 4.3 percent after shareholder Alecta rejected Volkswagen AG’s offer for the remaining shares in the truckmaker. Associated British Foods Plc jumped 8.9 percent after saying retail profit at its Primark budget fashion will be “well ahead” of last year’s, helping offset declines at AB Foods’ sugar business.

 

Junk Bonds

The biggest junk bond sale in history is being priced today as French billionaire Patrick Drahi arranges financing for his $23 billion acquisition of Vivendi SA’s phone unit SRF. More than $17 billion of high-yield notes in euros and U.S. dollars are being offered through Drahi’s Numericable Group SA and Altice SA units.

Portugal’s 10-year bond yield fell two basis points to 3.67 percent and touched 3.63 percent, the lowest since February 2006. The government sold 750 million euros ($1.04 billion) of 10-year securities at an average yield of 3.5752 percent, its first bond auction since requesting financial aid three years ago.

The Aussie fell at least 0.4 percent against all of its 16 major peers and touched a two-week low versus the dollar. The Australian statistics bureau said the trimmed mean gauge of consumer prices was 2.6 percent in the first quarter from a year ago, the same as the previous quarter and less than the 2.9 percent forecast in a Bloomberg News survey of economists.

The euro strengthened against 13 of its 16 counterparts.

A composite index based on a survey of purchasing managers in both industries in the euro area rose to 54 in April from 53.1 in March, London-based Markit Economics said today. That exceeded the median estimate of 53.0 in a Bloomberg News survey of economists and was the highest reading in almost three years. A reading above 50 indicates expansion.

 
With assistance from Jonathan Burgos in Singapore, Emma O’Brien in Wellington, Ian Sayson in Manila and Stephen Kirkland, Cecile Vannucci, Claudia Carpenter, Paul Dobson and Sofia Horta e Costa in London.

 

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