U.S. Stocks Drop as Europe Shares, Euro Erase Early Gains

By Stephen Kirkland & Pratish Narayanan 

U.S. stocks fell for a second day amid disappointing earnings reports and data on leading economic indicators and Philadelphia-area manufacturing that trailed estimates. European shares, oil and the euro erased earlier gains while Spanish bonds pared their advance. Gold rose.

The Standard & Poor’s 500 Index lost 0.7 percent at 10:09 a.m. in New York. The Stoxx Europe 600 Index slipped 0.2 percent, reversing a 0.7 percent rally. The euro was little changed at $1.3027 after strengthening 0.4 percent. Spain’s 10- year bond yield dropped one basis point to 4.67 percent and Italy’s fell one basis point to 4.24 percent. Gold for immediate delivery climbed 1.2 percent to $1,392.35 an ounce while West Texas Intermediate oil erased earlier gains. More than $1 trillion has been erased from the value of equities worldwide this week as concern deepened the global recovery was weakening and companies from Bank of America Corp. to Textron Inc. reported disappointing results. Finance ministers from around the world prepared to gather in Washington to discuss policies to support the economy and strengthen financial systems. Spain sold 4.71 billion euros ($6.14 billion) of bonds, more than its maximum target of 4.5 billion euros.

“It’s an important earnings season, with market participants trying to see if corporate earnings and forecasts are going to be in line with the weakening global macro data,” Serge Berger, a Zurich-based trader at Blue Oak Advisors LLC, said in a phone interview.

EBay (EBAY) Inc. and UnitedHealth Group Inc. helped lead the market lower today after releasing earnings.

Market Movers

The S&P 500 closed at the lowest level since March 25 yesterday and extended it retreat from a record on April 11 to 2.6 percent. EBay sank 4.7 percent today as the operator of the largest Internet marketplace reported first-quarter sales that missed some analysts’ estimates. UnitedHealth slid 3.5 percent as earnings were hurt by rising medical costs and lower government reimbursements. Morgan Stanley lost 3 percent after reporting earnings.

Verizon Communications Inc. advanced 3.2 percent as growth in wireless customers helped profit beat estimates, while PepsiCo Inc. rose 5.1 percent on better-than-estimated earnings.

Earnings Season

Microsoft Corp. and Google Inc. are also scheduled to report earnings in the U.S. today. Of the 81 companies in the S&P 500 (SPX) that have posted results this season, 74 percent have beaten profit estimates while 49 percent have topped revenue projections, according to data compiled by Bloomberg.

The index of U.S. leading indicators unexpectedly declined in March for the first time in seven months, a sign the world’s largest economy will cool. The Conference Board’s gauge of the outlook for the next three to six months fell 0.1 percent in March after climbing 0.5 percent in the prior two months. The median forecast of economists surveyed by Bloomberg called for a 0.1 percent increase.

The Federal Reserve Bank of Philadelphia’s general economic index fell to 1.3 in April from 2 the prior month. Readings greater than zero signal expansion in the area covering easternPennsylvania, southern New Jersey and Delaware. The median forecast of economists surveyed called for a reading of 3.

The Labor Department reported applications for jobless insurance payments increased by 4,000 to 352,000 in the week ended April 13, in line with the median forecast of economists surveyed by Bloomberg.

The Stoxx 600 (SXXP) closed yesterday at the lowest level of the year. The index tumbled 3.8 percent in four days, the most since a 4.4 percent slump ended July 25.

Nokia Sales

Nokia Oyj, the Finnish handset maker, reported a bigger drop in first-quarter revenue than analysts estimated. The stock sank 7.5 percent.

GlaxoSmithKline Plc climbed 3.6 percent to the highest in 11 years after advisers to the U.S.Food and Drug Administration recommended that experimental treatment Breo Ellipta be approved to treat a lung disorder.

The MSCI Emerging Markets Index (MXEF) declined 0.2 percent. South Korea’s Kospi index sank 1.2 percent as LG Display Co. tumbled 4.8 percent, the most in four months, after audio-chip maker Cirrus Logic Inc. reported an inventory glut that suggests iPhone sales may fall short of estimates. Hon Hai Precision Industry Co., which assembles Apple Inc.’s iPhone, dropped 1.3 percent in Taipei to the lowest level since Aug. 3.

Russia’s Micex Index rebounded from a 10-month low and India’s Sensex index climbed to a two-week high.

The yen weakened against all but three of its 16 major peers, sliding 0.2 percent to 98.27 per dollar and weakening 0.4 percent versus the euro.

Spain’s 2023 bonds were sold at an average yield of 4.612 percent, the least since September 2010. France raised 7.91 billion euros in a debt sale, with the yield on five-year notes falling to a record low auction rate of 0.73 percent.

Gold for immediate delivery advanced for a third day after the biggest plunge in three decades. The S&P GSCI gauge of 24 commodities climbed 0.5 percent. European Union emission permits rebounded 8 percent after tumbling 42 percent the previous two days.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net

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