U.S. stocks fall from 5-year high; euro rises

NEW YORK Tue Jan 8, 2013 2:04am IST

Traders work on the floor of the New York Stock Exchange, January 7, 2013. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, January 7, 2013.

Credit: Reuters/Brendan McDermid

Related Topics

Stocks

   

NEW YORK (Reuters) - Wall Street stock prices retreated from five-year highs on Monday, while the euro rose against the dollar on bets the European Central Bank might refrain from signaling more interest rate cuts on Thursday.

The weakness in the equities market, partly due to caution ahead of companies beginning to report on their fourth-quarter earnings, spurred selling of oil, gold and other risky investments. This stoked some safety bids for U.S. and German government debt.

Investors turned their focus to corporate profits in the last three months of 2012, when growth in American holiday spending and corporate investments was tepid as shoppers and companies dialed back on worries about the United States going over the 'fiscal cliff' - a series of automatic tax hikes and government spending cuts which could have kicked in if a budget deal in Washington were not reached last week.

"There is little doubt that concerns about the fiscal cliff created spending hesitancy in both consumers and businesses in the fourth quarter, and it is likely that will adversely impact earnings season," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab in Austin, Texas.

Earnings are expected to be only slightly better than the third-quarter's lackluster results and analysts' current estimates are down sharply from what they were in October.

"I think it's going to be a disappointing one this time around," Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said of the upcoming earnings season that unofficially launches with aluminum maker Alcoa (AA.N) reporting its results after Tuesday's market close.

Uneasiness about corporate profits emerged even after data on Friday showed U.S. employers kept up a modest pace of hiring in December and the vast services sector expanded.

Hopes for global economic recovery got a boost after the Basel Committee of banking supervisors agreed to give banks four more years and greater flexibility than previously envisaged to build protective cash buffers. That means they can use more of their reserves to lend and help economies grow.

In the United States, news of a longer timetable for banks to manage their capital was overshadowed by 10 banks agreeing to pay $8.5 billion to settle a federal review of their questionable foreclosure practices.

In midafternoon trading, the Dow Jones industrial average was down 74.46 points, or 0.55 percent, at 13,360.75. The Standard & Poor's 500 Index was down 8.30 points, or 0.57 percent, at 1,458.17. The Nasdaq Composite Index was down 11.91 points, or 0.38 percent, at 3,089.75.

Among the day's biggest movers were Nationstar Mortgage Holdings (NSM.N), whose shares rose 12 percent to $37.31 each after Bank of America (BAC.N) entered a deal to sell the servicing rights on over $300 billion of home loans to Nationstar and Walter Investment Management (WAC.A).

Walter stock rose 7.2 percent at $47.20.

After touching a 22-month peak last week, the FTSE Eurofirst index of top European shares ended 0.49 percent lower at 1,161.57, although the region's bank sector as measured by the STOXX euro zone bank index bucked the market trend, gaining 1.5 percent on the Basel news on bank capital.

MSCI's broad world equity index was down 0.35 percent at 346.48, but was still not far from an 18-month peak scaled when investors returned to the market after the immediate U.S. fiscal crisis was averted last week.

EURO GAINS BEFORE ECB MEETING

In the currency market, the euro was up 0.31 percent at $1.3109, erasing early losses. It held above a three-week low of $1.2998 hit on Friday.

Analysts predicted the single currency would stay around those levels until after the ECB meeting. Some expect the ECB to point to the prospect of easier rates early this year, contrasting with signals from Federal Reserve policymakers that the U.S. central bank may pursue less-accommodative policies in the future.

The Bank of Japan is also expected to take major steps to stimulate that country's economy later this month as the new government aims to end deflation and recession.

The greenback weakened against the yen, last down 0.57 percent at 87.64 yen. Last week, the dollar climbed to a 2-1/2- year high, which some traders reckoned was overdone.

Expectations of less-easy monetary policy from the Fed later this year mitigated the renewed safe-haven bids for U.S. government debt. The yield on benchmark Treasury 10-year notes was 1.90 percent, little changed from Friday when it ticked up to an eight-month high.

German Bund futures were up 27 basis points at 143.13, rebounding after hitting one-month lows last week.

The weakness in stocks dragged oil prices lower, but signs of improvement in the global economy rekindled bets on higher energy demand in 2013, paring their early losses.

Gold and copper prices were stuck near their session lows.

Brent crude futures were off 11 cents or 0.10 percent at $111.20 per barrel after rising 0.6 percent last week, while U.S. oil futures were up 7 cents or 0.08 percent higher at $93.16.

Spot gold was down 0.58 percent at $1,646.76 an ounce, though above Friday's $1,625.79, its lowest price since August.

Three-month copper futures in London closed 0.2 percent lower at $8,071 a tonne after losing nearly 1 percent the prior session.

(Additional reporting by Rodrigo Campos in New York; Richard Hubbard, Blaise Robinson, Anooja Debnath and David Brough in London; Editing by Dan Grebler and Chizu Nomiyama)

FILED UNDER:

Surprise Rate Cut

Reuters Showcase

Eicher Share Sale

Eicher Share Sale

Truck maker Volvo sells shares in Eicher Motors  Full Article 

Services Growth

Services Growth

Services growth at eight-month high in Feb - HSBC PMI  Full Article 

StanChart Results

StanChart Results

StanChart rules out share sale as profit plunges 25 pct  Full Article 

Bond Market

Bond Market

Bonds at 20-month highs, rupee gains after surprise rate cut  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Coal Imports

Coal Imports

India coal imports in Feb jump from year ago, but drop m/m  Full Article 

China Services

China Services

China Feb HSBC services PMI edges up to 52.0 as orders improve  Full Article 

Next Superhero

Next Superhero

Franchise Man swoops in to save Bollywood  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage