BLBG: Commodities Drop on Trichet, Dell; Dollar, Yen Rise
By Elizabeth Stanton
Nov. 20 (Bloomberg) -- Stocks and commodities fell after European Central Bank President Jean-Claude Trichet said policy makers will withdraw emergency cash gradually and Dell Inc.’s earnings trailed analysts’ estimates. The yen and dollar rose.
The Standard & Poor’s 500 Index slipped 0.3 percent to 1,091.42 at 10:17 a.m. in New York as Dell tumbled the most since July to lead declines in technology shares. Europe’s Dow Jones Stoxx 600 Index and the MSCI Asia-Pacific Index dropped for the fourth straight day, the longest losing streaks in four months. Crude oil declined 1.2 percent as the Dollar Index advanced as much as 0.8 percent.
“We live in a world where on a day-to-day basis all risk assets move in the same direction, and it’s the opposite direction from the dollar,” said John Kattar, who oversees $1.6 billion as chief investment officer at Eastern Investment Advisors in Boston. “There is a lot of good news built into stock prices and stocks are more or less fairly valued given the fundamentals.”
U.S. equities fell for a third straight day, with the S&P 500 poised for its first weekly decline since October. The Dow Jones Industrial Average lost 6.57 points, or 0.1 percent, to 10,325.87. Declines were limited today as J.M. Smucker Co. led gains in consumer staples companies after the maker of jams and Jif peanut butter reported better-than-estimated earnings.
Rebound Stalls
The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high of 1,110.32 on Nov. 17. The deepest U.S. economic contraction in seven decades ended in the third quarter, when government incentives spurred consumers to spend more on homes and cars. Corporate profits, which have shrunk from year-earlier levels for a record nine straight quarters, are projected to rise in the current period, according to analyst estimates compiled by Bloomberg.
Dell, the third-largest maker of personal computers, slid as much as 9.7 percent after reporting a 54 percent drop in profit.
European stocks slipped as Trichet said the ECB will remove liquidity in order to ensure the bank doesn’t fuel inflation.
“Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said at a conference in Frankfurt today. “Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally.”
Emergency Loans
Trichet has already signaled the ECB is unlikely to renew its offer of 12-month loans to banks after the third installment in December. Council member Guy Quaden indicated this week that the bank may offer fewer three-month and six-month loans next year. At the same time, policy makers have stressed the exit from emergency lending measures doesn’t necessarily imply they will raise interest rates soon.
Europe’s Dow Jones Stoxx 600 Index lost 0.4 percent, led by real-estate and financial shares. Asian shares declined after Sony Corp. said it will take longer to reach its profitability targets. Sony slid 2.4 percent in Tokyo.
The yen advanced 0.5 percent versus the euro and slipped less than 0.1 percent versus the dollar. The pound fell against the dollar, the euro and the yen on concern that the U.K.’s budget deficit makes the currency a relatively high risk when investors are seeking assets perceived to be safer.
Too Much Cash
Policy makers from India, South Korea, and Indonesia say they are concerned too much money is flowing into their securities markets and driving currencies higher, which may prompt capital controls. Gross at Pimco said the Fed’s efforts to “reflate the economy” require interest rates at a “painful level” that drives investors into higher-risk assets. Earlier this week, Federal Reserve Chairman Ben S. Bernanke said it’s “not obvious” that U.S. asset prices are out of line with underlying values.
Crude oil for December delivery declined 1.2 percent to $76.50 in New York. The December contract expires today.
Gold slipped 0.2 percent to $1,139.40 an ounce after reaching a record two days ago. Rhodium, used in catalytic converters, jumped 4.8 percent to $2,725 an ounce, for a weekly gain of 22 percent.
Treasury three-month bill rates turned negative yesterday for the first time since December as investors were willing to pay for the safety of the shortest-dated U.S. government assets.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
