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U.S. stocks, oil drop on housing data

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(Bloomberg) — U.S. stocks fell, led by industrial shares, and oil retreated after data showed fewer Americans than forecast signed contracts to buy previously owned homes. Chinese shares in Hong Kong entered a bull market.

The Standard & Poor’s 500 Index slid 0.5 percent to 1,968.74 as of 10:26 a.m. in New York. West Texas Intermediate crude dropped for a third day, falling 0.9 percent. The five- year Treasury note yield rose one basis point to 1.69 percent. The Hang Seng China Enterprises Index rose 0.7 percent, while Russian stocks and the ruble slumped amid the threat of further sanctions.

The housing data suggested that the residential market is struggling to strengthen as an index of pending home sales declined 1.1 percent in June after rising 6 percent in May, figures from the National Association of Realtors showed. Goldman Sachs Group Inc. said in a report last week that equities are at risk of a temporary selloff, citing rising bond yields and high valuations.

“The markets are looking at home sales,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. It “brings back the questions about what happens to interest rates going forward,” he said. “The market is really counting on the Fed remaining accommodative.”

The U.S. central bank announces its next policy decision at the conclusion of a two-day meeting on July 30. Investors will get a reading on second-quarter growth that same day, while the government’s labor report on Aug. 1 may show employers added 231,000 jobs this month.

Treasury yields

The difference between five- and 30-year Treasuries yields narrowed to the least since 2009 as subdued inflation supported longer maturities. The Fed’s Open Market Committee will scale back its monthly asset purchases to $25 billion from $35 billion on July 30, according to economists surveyed by Bloomberg, keeping it on pace to end the program late this year.

Cummins Inc. fell 3 percent to lead industrial shares lower. AcelRx Pharmaceuticals Inc. tumbled 36 percent after saying it failed to win approval for its pain treatment Zalviso from the Food and Drug Administration. Trulia Inc. jumped 8.6 percent as Zillow Inc. agreed to purchase the company for $3.5 billion. Family Dollar Stores Inc., a discount store chain, soared 22 percent after Dollar Tree Inc. agreed to buy it. Outside the U.S., international pressure mounted on Israel to end its three-week offensive in the Hamas-controlled Gaza Strip, with President Barack Obama and the United Nations Security Council demanding an immediate truce.

Separatist war

In Europe, President Vladimir Putin faces intensifying U.S. and European sanctions aimed at forcing him to help end the separatist war in neighboring Ukraine. The Obama administration said it had satellite photos showing Russia firing across the border at Ukraine forces.

“Everything’s a little murky,” said Irwin Michael, fund manager at ABC Funds in Toronto. His firm manages about CDN$900 million. “With what’s happening in Russia and the Ukraine and what sort of sanctions will be put on, that’s a concern, and there’s concern about the Middle East and Gaza.”

Russia’s Micex lost 1.8 percent, extending declines from this year’s peak to more than 10 percent. The ruble retreated for a third day, heading for the weakest level since May. Satellite photos show Russia has shelled across the border into Ukraine, the U.S. said.

The Hang Seng China Enterprises Index has risen more than 20 percent from this year’s low as government stimulus boosts investor confidence in the world’s second-largest economy.

Catalytic converters

Rhodium advanced to the highest price in 16 months and is set for the biggest monthly gain since 2009 as demand from carmakers increased amid restricted supply. The metal, used in catalytic converters to curb harmful emissions, climbed to $1,250 an ounce on July 25, the highest since March 26, 2013, Johnson Matthey data on Bloomberg show.

Pfizer Inc., Reynolds American Inc. and American Express Co. are among some 150 S&P 500 companies reporting this week. About 79 percent of U.S. companies that have posted results this season have beaten analysts’ estimates for profit, while 66 percent exceeded sales projections, according to data compiled by Bloomberg.

Quarterly profit growth is poised for the fastest increase in almost three years. Companies in the S&P 500 have reported an 11 percent gain in second-quarter earnings, data compiled by Bloomberg show. Should the pace continue, the gain would exceed all periods since the third quarter of 2011.

“It is quite an important week in terms of earnings reports,” Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH, which oversees about $22 billion, said in a phone interview. “Earnings have been good and markets want to see that this is going to carry on.”

–With assistance from Stephen Kirkland, Cecile Vannucci, Shelley Smith, Paul Dobson, Maria Kolesnikova and Grant Smith in London and Eric Lam in Toronto.


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