(Bloomberg) — U.S. stocks tumbled from the biggest gain in two months, as disappointing results from Walt Disney Co. to Macy’s Inc. raised doubts about the strength of the American consumer, while oil rose after an unexpected drop in inventories and the dollar fell.
The S&P 500 index retreated for the first time in four days, while the Dow Jones Industrial Average erased all but five points of its Tuesday gain. Retailers led declines as Disney sank and an outlook from Macy’s sent apparel shares tumbling. Energy producers rose as crude surged past $46 a barrel. Industrial metals from climbed as Glencore Plc forecast demand to exceed supply. Brazilian shares advanced with the real as the Senate geared up for a vote that could oust the president.
As a mixed earnings season draws to a close, Macy’s Inc.’s disappointing sales raised the specter of a weakening U.S. consumer and ABN Amro Group NV’s 13 percent slide in profit reignited concern about the health of the European banking sector. That’s adding to the gloom in global equities after a selloff last week erased some $1.3 trillion of value, spurred by subdued economic data in the U.S. and China.
“Given that equities are about 3 percent away from all-time highs in absence of earnings growth, equities are priced to perfection within a thin margin of error,” Terry Sandven, who helps oversee $126 billion as chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. “We still need to see earnings accelerate in the second half of this year to propel stocks higher. Upcoming catalysts suggest a cautious bias with an unclear Fed and Brexit meeting.”
– – –
The S&P 500 fell 1 percent at 4 p.m. in New York, halting a three-day rally of 1.7 percent. The index extended losses in afternoon trading, as the slump in consumer shares took the group to its biggest drop in three months.
Staples Inc. slid and Office Depot Inc. both plunged the most on record as they abandoned a merger. Disney fell the most since January after posting profit that missed estimates and saying it will shut down its Infinity video-game division. Macy’s slid to the lowest since 2011 as the largest U.S. department-store company cut its profit forecast for this year and posted first-quarter revenue that missed analysts’ estimates
Analysts have moderated their predictions for a decline in first-quarter profits to 7.4 percent, from 9.5 percent at the start of April. So far, about 75 percent of the firms that have released results beat profit estimates, and 54 percent exceeded sales projections.
The Stoxx 600 lost 0.5 percent. A gauge of lenders fell the most on the index, with Raiffeisen Bank International AG tumbling after saying it’s considering merging with its parent company to ease the pressure of regulatory requirements. EON SE led utility stocks lower on concerns about how much new capital Germany’s largest utility will need to fund the nation’s exit from nuclear power.
The MSCI Emerging Market index rose 0.2 percent as investors assessed prospects for global growth and political risks. The Ibovespa extended this year’s rally as local investors flood back into the stock market ahead of an impeachment vote Wednesday that may cut short Dilma Rousseff’s presidency.
– – –
U.S. Treasuries due in a decade rose, sending the yield lower by three basis points to 1.73 percent, the lowest in a month. Odds on the Fed raising key rates at its next meeting in June have dropped to 4 percent, from 17 percent a week ago, before weaker-than-projected U.S. payrolls data undermined perceptions of the economy’s strength.
A report on retail sales is due Friday, along with an update on producer prices. The U.S. auctioned $23 billion of 10-year notes on Wednesday.
Pacific Investment Management Co.’s Total Return Fund is reducing its holdings of developing-nation debt on speculation the Fed is still on course to raise interest rates. The fund cut its holdings of emerging-market debt to the lowest level in almost two years in April, based on data from the Pimco website.
Spain is the latest euro-region sovereign to sell 50-year bonds, with an issue via banks that priced Wednesday. It follows half-century deals last month from France and Belgium as countries take advantage of historically low interest rates to issue ultra-long debt.
– – –
The yen climbed 0.8 percent to 108.45 per dollar, after sliding more than 2 percent over the last two days. The currency has gained more than 10 percent this year, making it harder for the Bank of Japan to achieve its inflation goal.
The Bloomberg Dollar Spot index, which tracks the greenback against 10 major peers, fell for a second day. The gauge had its strongest rally in almost a year in the five days through Monday.
Brazil’s real strengthened 0.5 percent to 3.4595 per dollar as the Senate gears up for a vote that would force Rousseff out.
– – –
West Texas Intermediate crude rallied 3.3 percent to settle at $45.98 a barrel. Crude stockpiles fell 3.41 million barrels last week, the Energy Information Administration said. Analysts surveyed by Bloomberg had projected a 750,000-barrel gain.
Gold gained 0.8 percent to end at $1,275.50 an ounce in New York, buoyed by the dollar’s retreat. Goldman Sachs Group Inc. this week raised its forecasts for bullion prices as it scaled back expectations of U.S. Federal Reserve rate hikes over the next year.
Zinc and lead rose by more than 2 percent in London, while copper gained 1.1 percent. Commodities are “now close to pre-supercycle levels,” when growth in Asia fueled a surge in prices, Glencore said Tuesday. The London Metal Exchange’s LMEX index of six industrial metals closed at a one-month low on Tuesday.
– – –
With assistance from Alan Soughley, Anooja Debnath, Joe Deaux, Mark Shenk and Paula Sambo.