By Nick Baker and Rita Nazareth - Oct 19, 2011 7:16 AM GMT+0700
U.S. stock futures fell after Apple Inc. (AAPL), the world’s biggest company by market value, missed analysts’ profit estimates for the first time since at least 2004. The euro weakened after Moody’s Investors Service cut Spain’s credit rating.
Standard & Poor’s 500 Index futures expiring in December declined 0.6 percent to 1,216.10 at 9:10 a.m. Tokyo time, after the measure added 2 percent yesterday. Apple sank 6.7 percent to $393.97. Futures on the Nasdaq-100 Index, which gets 15 percent of its value from Apple, lost 1 percent. The MSCI Asia Pacific Index added 0.5 percent as Japanese and Australian shares gained. The euro depreciated 0.2 percent to $1.3728. Oil and copper slid.
Apple’s income trailed the average analyst forecast by 3.5 percent after customers delayed purchases before a new iPhone was released. Moody’s cut Spain to A1 from Aa2, citing the lack of a “credible resolution” to Europe’s debt crisis. While U.S. equities extended gains in the final hour of trading yesterday after the Guardian reported Germany and France agreed to boost the region’s rescue fund, a person with direct knowledge of the talks told Bloomberg News no deal has been reached.
“There’s just no conviction that seems to survive,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “Apple’s results have disappointed some people. People are wondering where the economy is going, what earnings will look like and whether Europe will work its way through this crisis.”
Stocks rallied yesterday amid optimism about the European debt crisis and after Bank of America Corp. (BAC) posted better-than- estimated results. Treasuries fell, while commodities and the euro advanced.
Bank of America
Bank of America surged 10 percent to lead gains in the Dow Jones Industrial Average yesterday after posting third-quarter profit of $6.23 billion as credit quality improved and results were boosted by one-time items, including a $4.5 billion gain related to debt valuations.
Financial shares in the S&P 500 surged 5 percent for the best advance among 10 industries. JPMorgan Chase & Co. and Citigroup Inc. surged at least 5.9 percent. State Street Corp., the custody bank, rallied 11 percent after profit increased a stronger-than-forecast 11 percent. Goldman Sachs Group Inc. climbed 5.5 percent even after reporting its second quarterly loss in 12 years.
Pulte Group Inc. (PHM) rallied 11 percent to pace gains in 11 of 12 stocks in an S&P index of homebuilders, which surged 9.6 percent for its best gain since March 2009. The National Association of Home Builders/Wells Fargo sentiment index climbed to 18 from 14 in the prior month. Economists surveyed by Bloomberg News projected the measure would rise to 15, according to the median forecast. Readings below 50 mean more respondents said conditions were poor.
‘Watching Paint Dry’
“The funny thing about sitting around watching paint dry is that it does actually eventually dry, and something similar may finally be occurring to the moribund U.S. new home market which has been a notable absentee from the 2 1/2-year-old U.S. recovery,” Michael Shaoul, chairman of Marketfield Asset Management in New York, said in a note to clients.
The euro weakened 0.3 percent to 105.35 yen, snapping yesterday’s gains. The downgrade of Spain at Moody’s, the third reduction since June 2010, comes a day after the ratings company said France’s Aaa credit rating is under threat.
The shared currency rose as much as 0.6 percent versus the dollar yesterday as the Guardian said Germany and France agreed before a weekend summit to an increase in the 440-billion euro ($604 billion) European Financial Stability Facility.
European Banks
The two nations have also supported recapitalizing the region’s banks to meet a 9 percent capital ratio that may be required by the European Banking Authority, the newspaper reported. A spokesman for German Chancellor Angela Merkel declined to comment.
Germany and France have yet to agree on how to bolster the European bailout fund as they seek to overcome technical hurdles and to complete a plan to stem to debt crisis, said a person with direct knowledge of the talks.
The New Zealand dollar weakened 0.3 percent to 79.33 U.S. cents, after yesterday gaining 0.5 percent. Australia’s currency slipped 0.3 percent to $1.0235, while its benchmark S&P/ASX 200 Index advanced 0.8 percent, rebounding from yesterday’s 2.1 percent drop. The Nikkei 225 climbed 1 percent.
“It’s going to be relatively muted because Apple’s earnings was clearly disappointing and a lot of nervousness around what solution we are likely to see regarding Europe at the moment,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “We will see things move a little bit higher in Asia, but they will remain fragile.”
Oil for November delivery retreated as much as 0.3 percent to $88.04 a barrel in afterhours electronic trading on the New York Mercantile Exchange. Futures advanced 2.3 percent yesterday to settle at the highest price since Sept. 15, helping the S&P GSCI Index of commodities to a 0.7 percent gain. Three-month copper declined 0.4 percent to $7,420.75 a metric ton on the London Metal Exchange, a third day of losses.
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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