U.S. Stocks Retreat, Commodities Trim Gain as Italy Bonds Drop

By Michael P. Regan and Rita Nazareth - Oct 5, 2011 8:50 PM GMT+0700

U.S. stocks fell, while European shares and commodities trimmed earlier gains, as investors watched for signs of progress in Europe’s efforts to halt its debt crisis. The euro weakened against 12 of 16 major peers and Italian bonds declined.

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,120.8 at 9:49 a.m. in New York after closing 2.3 percent higher yesterday following a late-day rebound. The Stoxx Europe 600 Index was up 1.9 percent, paring a 2.3 percent rally, and the S&P GSCI Index of commodities trimmed a 2.1 percent gain in half. Italian 10-year yields rose six basis points after Moody’s Investors Service cut the nation’s credit rating.

While European Union leaders are discussing an effort to recapitalize banks, EU Economic and Monetary Commissioner Olli Rehn doesn’t have “a concrete plan in hand,” his spokesman, Amadeu Altafaj, said today after a Financial Times report of the discussions triggered a surge in U.S. equities in the final hour of trading yesterday.

“The jury is still out,” Bruce Bittles, who helps oversee $85 billion as chief investment strategist at Milwaukee-based Robert W. Baird & Co., said in a telephone interview. “The market’s ability to continue to rally will depend on whether the economy will slip into recession or continue in slow growth pace. There’s no easy, painless solution out of the European situation. It’s complicated.”

Jobs Data

U.S. stock futures gained before the open of exchanges after companies in the U.S. added 91,000 jobs in September, according to data from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 75,000. A Labor Department report in two days is forecast to show a 90,000 increase in private jobs and a net 60,000 gain in non-farm payrolls, according to the median economist estimates in a survey, with the unemployment rate projected to remain at 9.1 percent.

The S&P 500 closed 2.3 percent higher yesterday following the FT report. It was the 10th time since 1985 that the index posted a loss of 1 percent or more at 3 p.m. and was up when the market closed, according to data compiled by Bespoke Investment Group LLC in Harrison, New York. The measure declined the next day eight times, with losses averaging 1.3 percent, the data show.

Alcoa Inc., the largest U.S. aluminum producer, will mark the unofficial start of the earnings-reporting season when it reports results on Oct. 11. Third-quarter profits for S&P 500 companies are projected to have grown 13 percent, according to analyst forecast compiled by Bloomberg, down from an estimate of 17 percent when the index traded at a three-year high at the end of April.

Brian Belski, chief investment strategist at Oppenheimer & Co. in New York, predicted a “nice year-end rally” in stocks after profits come in higher than analysts’ estimated.

“Earnings will surprise to the upside, earnings estimates have been slashed too much,” Belski said on Bloomberg Television’s “Inside Track With Deirdre Bolton and Erik Schatzker.” “Corporate America has gone through so much structural reform in the last 10 or 12 years that they continue to be positioned to under-promise, over-deliver.”

To contact the reporters on this story: Michael P. Regan in New York at mregan12@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