Stocks fell for the first time in four days and the euro slid from a three-week high against the dollar after European economic growth slowed more than forecast. Treasuries rose even after U.S. industrial output climbed and Fitch Ratings affirmed the nation’s AAA credit rating.
The Standard & Poor’s 500 Index declined 0.9 percent as of 11:19 a.m. in New York after rallying 7.5 percent in the three previous sessions, its biggest jump since March 2009. The Stoxx Europe 600 Index lost 0.5 percent. The euro weakened 0.3 percent to $1.4396. Ten-year Treasury yields slipped four basis points to 2.27 percent. The cost of insuring European government debt snapped three days of declines. Oil slid 1 percent in New York and copper fell 1.2 percent.
Caterpillar Inc. and 3M Co. fell more than 1.5 percent as Germany’s economy, Europe’s largest, expanded 0.1 percent from the first quarter, while growth in the euro area was a less- than-forecast 0.2 percent, reports showed today. Homebuilders PulteGroup Inc. and Lennar Corp. dropped as U.S. housing starts fell last month, the Commerce Department said, in a sign that residential real estate is failing to contribute to American growth two years into an economic recovery.
“People are desperate for stability in unpredictable times,” Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees $4 billion, said in a telephone interview. “The economy and consumers are not as strong as people thought regardless of how bad they wanted the market to go up. Europe is a mess. There’s no easy answer on how to get economic growth going again.”
Financial, Energy Firms Lead Drop
The S&P 500’s retreat today was led by financial firms, energy producers and industrial companies. Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. dropped more than 1.2 percent as commodity prices sank. The S&P 500 rose 2.2 percent yesterday, erasing all of its losses from last week, when S&P cut the U.S.’s AAA credit rating for the first time.
Housing starts fell 1.5 percent to a 604,000 annual rate, in line with the median forecast of economists surveyed by Bloomberg News, from June’s 613,000 pace that was less than previously estimated, the Commerce Department said. A separate report showed industrial production in the U.S. climbed in July by 0.9 percent, the most this year and almost twice as fast as economists forecast, as carmakers started to shake off the effects of the disaster in Japan and higher temperatures boosted utility use.
Billionaire Warren Buffett said his Berkshire Hathaway Inc. made its biggest bets on stocks this year on Aug. 8, when the S&P 500 plunged 6.7 percent, its worst drop since December 2008, after the U.S. was stripped of its AAA credit rating at S&P. Berkshire Hathaway increased its stake in Wells Fargo & Co., building equity holdings amid the market decline, according to a filing yesterday.
‘Buying on Sale’
“I like buying on sale,” Buffett, Berkshire’s chief executive officer and head of investments, said in an interview with Charlie Rose. “Last Monday, we spent more money in the stock market buying than any day this year.”
Wal-Mart Stores Inc. and Home Depot Inc. rose the most in the Dow Jones Industrial Average. Wal-Mart gained 3.7 percent as the world’s largest retailer boosted its profit forecast for the year after its Sam’s Club wholesale chain helped the company halt a decline in sales at its U.S. stores. Home Depot added 4.8 percent after the largest U.S. home improvement retailer raised its full-year profit forecast after second-quarter profit exceeded analysts’ estimates.
Jackson Hole Conference
U.S. Treasuries advanced amid speculation the Federal Reserve may take further action to support the U.S. economy if it weakens further. Fed Chairman Ben S. Bernanke may announce policy intentions at a conference in Jackson Hole, Wyoming, later this month. The yield on the 30-year Treasury bond declined five basis points to 3.72 percent.
Fitch affirmed its AAA credit rating for the U.S. and said the outlook is stable, citing the nation’s central role in the global financial system and the flexible, diverse economy. Fitch had put the rating under review after lawmakers reached a compromise Aug. 2 on a debt-limit agreement that prevented a U.S. default. S&P on Aug. 5 cut its U.S. rating to AA+ from AAA, saying lawmakers failed to cut spending enough to reduce record deficits. Moody’s Investors Service affirmed its top U.S. ranking last week.
All but five of 19 industry groups in the Stoxx 600 declined. Daimler AG led losses among automakers. Terna SpA, the owner of Italy’s national power network, slid 13 percent as the government increased taxes on the industry.
Euro Weakens
The euro weakened against 13 of its 16 major counterparts, depreciating 0.4 percent against the yen. The Markit iTraxx SovX Western Europe Index of credit-default swaps rose 1.9 basis points to 277.
French President Nicolas Sarkozy and German Chancellor Angela Merkel are set to meet today amid investor calls for policy makers to do more to tackle the region’s debt crisis. The meeting comes after debt concerns rattled France, the second- largest euro economy after Germany, last week, while calls are growing for the leaders to discuss joint borrowing or a mutual guarantee among the 17 euro states, policies that Germany and France have previously rejected.
The MSCI Emerging Europe, Middle East and Africa Index fell 1 percent, its first decline in four days. Russia’s Micex Index slid 2 percent, the most since Aug. 10. South Korea’s Kospi Index (KOSPI) rose 4.8 percent following a holiday yesterday.
Spanish two-year yields rose less than one basis point to 3.20 percent even as the European Central Bank bought the nations’ debt, according to three people with knowledge of the transactions. An ECB spokesman declined to comment. The yield on the 10-year Italian bond slipped four basis points.
Spanish Auction
Spain sold 5.7 billion euros ($8.2 billion) of 371- and 546-day debt, less than the maximum target of 6 billion euros, with demand at both auctions falling from the previous sales. Greece sold 1.3 billion euros of 91-day bills today to yield 4.5 percent.
The extra yield investors demand to hold French 10-year bonds instead of benchmark German bonds rose two basis points, increasing for the first time in four days, before the government auctions as much as 7.5 billion euros of 49-, 84- and 189-day securities.
The Swiss franc erased gains against its major peers, falling 0.9 percent against the dollar after gaining as much as 0.9 percent.
Swiss National Bank Vice President Thomas Jordan said the central bank is assessing “a whole range of options” to counter the franc’s strength, according to an Aug. 11 interview in Tages-Anzeiger. The currency appreciated to a record 1.00749 per euro on Aug. 9.
Krone, Pound
Norway’s krone slid against most major peers, slipping 0.1 percent against the dollar, after Finance Minister Sigbjoern Johnsen pledged to curb gains that threaten the nation’s exports. The krone’s strength is “probably largely due to the uncertainty we see and, of course, Norway’s solid economy attracting capital,” Johnsen said yesterday in an interview in Oslo. “And that underlines how important it is for us, through our fiscal policy, to do what we can to reduce the pressure on interest rates and thereby also on the krone.”
Britain’s pound appreciated 0.5 percent against the euro after data showed inflation accelerated more than economists predicted last month. Consumer prices rose at an annual 4.4 percent rate, after a 4.2 percent increase in June, the Office for National Statistics said in London. Economists forecast 4.3 percent.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 0.2 percent.
Oil for September delivery fell 1 percent after dropping as much as 2.6 percent. Copper for December delivery declined 1.2 percent to $4.004 a pound on the Comex in New York. Germany was the third-largest copper buyer last year, after China and the U.S. Gold jumped 1.6 percent to $1,786.90 an ounce.
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