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BL: Stocks Retreat as Dollar, Treasuries Gain on Slump in Consumer Confidence

By Nikolaj Gammeltoft


Feb. 23 (Bloomberg) -- Stocks tumbled in New York and Europe, while the dollar and Treasuries gained, as declines in confidence among U.S. consumers and German businesses spurred concern the global economic recovery will slow.

The Standard & Poor’s 500 Index fell 1 percent to 1,097.3 at 12:03 p.m. in New York and Europe’s Dow Jones Stoxx 600 Index slumped 1.2 percent. All 39 energy companies in the S&P 500 retreated as crude oil sank as much as 2.6 percent to $78.22 a barrel. The dollar strengthened against 15 of 16 major counterparts, while the yield on the 10-year Treasury note slid seven basis points to 3.72. Copper, lead and zinc each lost more than 2.9 percent.

The Conference Board’s index of U.S. consumer sentiment declined to 46, the weakest level in 10 months and below the lowest forecast in a Bloomberg News survey of economists. The Ifo institute’s German business climate index dropped in January as the coldest winter in 14 years hurt retail sales and construction. The reports spurred concern that an 11-month global rally in stocks has overshot the economy’s prospects.

“The market is looking for signs of growth and confidence and this is just more data against that view,” said Giri Cherukuri, who helps manage $1.7 billion at Oakbrook Investments in Lisle, Illinois. “The lack of confidence means that economic growth will be slower.”

All 10 industry groups in the S&P 500 retreated, led by declines of at least 1.1 percent in commodity producers and technology companies. Home Depot led the Dow Jones Industrial Average higher in early trading after the world’s largest home improvement retailer posted earnings that topped analysts’ estimates and raised its dividend for the first time since 2006.

Earnings Watch

Of the more than 400 companies in the S&P 500 index that announced results since Jan. 11, about 76 percent have beaten forecasts for earnings on a per-share basis, according to Bloomberg data.

The MSCI World Index of 23 developed nations’ stocks fell 0.9 percent as the German confidence report overshadowed earnings that beat analysts’ estimates.

Wolseley Plc rose 12 percent in London after forecasting profit ahead of analysts’ estimates. Heineken NV, the world’s third-largest brewer, climbed 3.1 percent in Amsterdam and Carlsberg A/S surged 8 percent in Copenhagen after earnings topped forecasts. Commerzbank AG declined 6.5 percent in Frankfurt after posting a wider-than-estimated loss.

The Dollar Index, which tracks the currency against six major trading partners, climbed 0.2 percent to 80.692, the highest on a closing basis since July 8, 2009.

Interest-Rate Watch

Federal Reserve Bank of San Francisco President Janet Yellen said yesterday the U.S. economy still needs “the support of extraordinarily low rates” as policy makers try to damp speculation that last week’s increase in the Fed’s discount rate signals a rise in borrowing costs.

While U.S. the central bank increased its discount rate for direct loans to banks last week, Fed Chairman Ben S. Bernanke is likely to reassure U.S. lawmakers tomorrow that the target rate for federal funds will remain in the range of zero to 0.25 percent.

“Growth is recovering, but it’s not recovering too fast to have the major central banks tighten monetary policy,” Rajeev de Mello, the Singapore-based head of Asian investment at Western Asset Management Co., which oversees about $482 billion, said in an interview on Bloomberg Television. “We don’t think that the Fed’s going to tighten until very late this year, if at all. We don’t think the ECB is going to tighten,” he said, using the abbreviation for the European Central Bank.

Greece Credit Woes

Greece’s ASE stock index slumped 1.8 percent and yields on the nation’s 10-year bonds rose seven basis points to 6.48 percent. Greece’s four largest lenders, including National Bank of Greece SA and EFG Eurobank Ergasias SA, had their credit ratings lowered at Fitch Ratings, which said the country’s economic crisis will hurt asset quality.

The Swiss franc dropped as much as 0.4 percent versus the euro for the biggest decline since Feb. 5, snapping a four-day advance.

German bonds advanced after the Ifo report, driving the yield on the 10-year security down by 10 basis points to 3.17 percent.

Asian shares rallied, with Thailand’s SET Index rising 1.4 percent and Indonesia’s Jakarta Composite Index up 0.8 percent. The MSCI Emerging Markets Index climbed as much as 0.5 percent before reversing gains after the economic reports. fresh demand.”

Gold futures for April delivery fell $7.70, or 0.7 percent, to $1,105.40 an ounce in New York. The most-active contract fell 0.8 percent yesterday, the most in two weeks.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at [e-mail]

Last Updated: February 23, 2010 12:08 EST