Stocks, Treasuries, Oil Decline as Bernanke Damps Stimulus Bets
July 14 (Bloomberg) -- Stocks fell, driving the Standard & Poor's 500 Index to the lowest level of the month, and oil slumped after Federal Reserve Chairman Ben S. Bernanke said he's not prepared to take immediate action to stimulate the economy. Gold and silver gained, while U.S. Treasuries dropped.
The S&P 500 slumped 0.8 percent at 1:20 p.m. in New York after slid to as low as 1,307.15, the weakest intraday level since June 29. The MSCI All-Country World Index of shares in 45 nations lost 0.7 percent. Yields on 10-year Treasuries climbed one basis point to 2.89 percent on concern political gridlock will cause the U.S. to lose its top credit rating. U.S. notes pared losses after an auction of 30-year debt. Crude retreated 3.4 percent to $94.73 a barrel. Gold futures touched a record for a second day silver jumped 1.6 percent.
Bernanke's remarks snuffed out an early rally in stocks triggered by better-than-forest earnings at JPMorgan Chase & Co. and improving economic data. Treasuries slid after Moody's Investors Service said yesterday it may cut the U.S. government's Aaa rating as negotiations to increase the debt limit stall in Congress.
"Bernanke may have spooked markets, but the markets better get used to no QE3," Brian Belski, chief investment strategist at Oppenheimer & Co., said in a telephone interview. "All eyes are on Washington in terms of the budget. We're in this classic tug-of-war between micro and macro because of the earnings season, which is still very early. It's still too soon to put a defining word on earnings."
Gain Erased
The S&P 500 erased yesterday's 0.3 percent gain, which snapped a three-day slump that dragged it down 2.9 percent. JPMorgan was the first major U.S. bank to report second-quarter earnings. Google Inc., the biggest Internet search company, will release results after markets close.
Early gains were also spurred by a government report that showed initial jobless claims fell by 22,000 to 405,000 last week. Other data showed U.S. wholesale costs dropped more than forecast in June and sales stagnated at U.S. retailers last month.
The dollar weakened 0.9 percent versus the New Zealand dollar, which strengthened against all 16 major peers monitored by Bloomberg after a report showed manufacturing and farming led the fastest quarterly growth in more than a year, spurring speculation the central bank will raise interest rates.
The yield on the 30-year Treasury bond climbed two basis points to 4.19 percent after the U.S. sold $13 billion of the securities, the last of three auctions this week totaling $66 billion.
Default Swaps Rise
Credit-default swaps insuring U.S. debt climbed 5 basis points to 55 as of 11:16 a.m. in New York, the highest since February 2010, according to CMA.
Italian government bonds declined, sending the 10-year yield up nine basis points to 5.63 percent, as borrowing costs rose to a three-year high at a sale of five-year debt today even as the nation's Senate voted for budget cuts.
The yield on the Spanish 10-year bond rose six basis points, driving the premium investors demand to hold the debt instead of benchmark German bunds six basis points higher to 314 basis points.
More than six shares fell for every one that advanced in the Stoxx Europe 600 Index, which slid 0.8 percent. Software AG, Germany's second-biggest maker of business software, plunged 16 percent after reporting a decline in sales. Daily Mail & General Trust Plc lost 4.1 percent as the publisher of the Daily Mail newspaper said advertising revenue fell.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net Victoria Stilwell in New York at vstilwell@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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