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segunda-feira, março 16, 2009

U.S. Markets Wrap: Stocks Erase Rally, Bonds Drop, Dollar Slips

By Cristina Alesci and Dakin Campbell

March 16 (Bloomberg) -- U.S. stocks fell for the first time in five days as a rally in financial companies was snuffed out by concern over rising credit-card defaults, while SanDisk Corp. led a slump in technology shares. Treasuries dropped and the dollar weakened against the euro, while copper and oil advanced.

American Express Co. decreased 3.3 percent, erasing an 8.1 percent gain, after reporting higher delinquency rates for February. SanDisk, the biggest maker of flash memory cards, tumbled 11 percent as Bank of America Corp. advised selling the shares. Stocks rallied earlier after the Group of 20 vowed to clean up toxic assets, Federal Reserve Chairman Ben S. Bernanke said the recession may end this year and U.K. bank Barclays Plc reported a “strong” start to 2009.

The Standard & Poor’s 500 Index slipped 0.4 percent to 753.89, erasing a gain of as much as 2.4 percent. The Dow Jones Industrial Average lost 7.01 points, or 0.1 percent, to 7,216.97. The S&P 500 had jumped 12 percent in the previous four sessions on speculation the worst of the credit crisis was over.

“A relief rally cannot continue until investors have greater faith that the problems in the economy have been worked out,” said William Dwyer, senior investment officer at Baltimore-based MTB Investment Advisors Inc., which oversees $24 billion.

The S&P 500 has declined 17 percent in 2009, rising in only two of 10 weeks this year, as mounting losses at banks raised concern the government would be forced to nationalize some lenders. The index lost 38 percent in 2008, its worst year since the Great Depression.

Financial Rally Reversed

American Express dropped 43 cents to $12.66. The company said 5.3 percent of its credit-card loans were at least 30 days late at the end of February, up from 4.7 percent in December and 5.1 percent in January.

The S&P 500 Financials Index slumped 1.9 percent, the most among 10 industries. JPMorgan Chase & Co. fell 2.8 percent to $23.09. Citigroup Inc. pared its gain to 31 percent from 51 percent earlier, while Bank of America Corp. added 7.3 percent after surging 21 percent.

The gauge of 81 banks, brokerages, insurers and investment firms climbed as much as 5.8 percent earlier before heading lower in the final 90 minutes of trading. The group rallied 34 percent last week, the steepest advance since S&P created the financials gauge in 1989, after Citigroup, Bank of America and JPMorgan said they were profitable in the first two months of the year.

‘Some Fear’

“There is some fear that maybe the rally isn’t for real and investors want to make sure that it doesn’t roll over and break to new lows,” said Bruce McCain, chief investment strategist at Cleveland-based Key Private Bank, which manages $22 billion. “The AmEx news may have provided the excuse for rethinking how much investors should jump in.”

SanDisk tumbled 11 percent to $9.83, its steepest slide in almost six weeks. Bank of America reinstated coverage of the shares with an “underperform” rating on concern over a glut of production capacity.

A gauge of 75 technology stocks in the S&P 500 dropped 1.7 percent. Intel Corp., the world’s biggest chipmaker, slumped 3.1 percent to $14.25, ending a six-day winning streak. National Semiconductor Corp. retreated 6.5 percent to $9.40.

Treasuries declined, sending yields on 30-year bonds to the highest level in almost four months, as speculation the credit crisis is easing pared demand for the safety of government debt. Bonds fell following the comments from Barclays, the Group of 20 meeting and Bernanke.

Confidence Returns

“The market is looking for some reason to break to higher yields,” said Paul Horrmann, a strategist in Jersey City, New Jersey, at ICAP Plc, the world’s largest inter-dealer broker. “The Bernanke interview went well and that put a lot of confidence back in the market.”

The yield on the benchmark 10-year note rose six basis points, or 0.06 percentage point, to 2.96 percent at 4:21 p.m. in New York, according to BGCantor Market Data. The price of the 2.75 percent security maturing in February 2019 dropped 17/32, or $5.31 per $1,000 face amount, to 98 1/4.

The 30-year bond yield, which gained 12 basis points last week, climbed nine basis points to 3.76 percent. It touched 3.82 percent, the highest since Nov. 20.

The euro climbed against the dollar for a fifth day, the longest stretch of gains in three months, on speculation the worst of the banking crisis was over and as Group of 20 policy makers said they would double the International Monetary Fund’s resources.

Swiss Franc, Won

The Swiss franc declined to the weakest level against the euro in almost three months after the central bank intervened last week to weaken the currency. The dollar dropped to a one- month low versus the South Korean won and Swedish krona as aversion to less-liquid, higher-yielding assets abated.

“One of the big things hanging over the euro has been concern about the exposure to eastern Europe,” said Ron Leven, executive vice president and a senior currency strategist at Morgan Stanley in New York. “If the IMF is going to have assets to provide support to these countries, that at least postpones and reduces that risk and makes it euro-positive.”

The euro rose 0.3 percent to $1.2961 at 4:02 p.m. in New York, from $1.2928 on March 13. It gained 2.2 percent last week, the first weekly advance since early February. The euro will appreciate to $1.40 this year, said Leven. The yen slid 0.3 percent to 98.20 versus the dollar from 97.95 and 0.5 percent to 127.26 per euro from 126.65.

‘Sustained’ Effort

The 16-nation currency earlier surged past $1.30 for the first time since Feb. 10 after G-20 finance ministers at a meeting in the U.K. over the weekend pledged a “sustained” effort to end the global recession. They also told the IMF it will have its resources at least doubled to $500 billion after being inundated with loan requests from Pakistan to Hungary.

Copper prices soared to the highest in four months after February imports of the metal jumped to a record in China, the world’s biggest buyer.

Imports of copper and alloys surged 55 percent to 283,461 metric tons from January, the Beijing-based customs office said today. That was the highest level since at least 2004, according to Bloomberg data. Futures in New York have gained 24 percent this year on speculation that government-spending plans would revive demand.

“We’re looking at places in the world like China that are going to be the leader going forward,” said Paul Baiocchi, who helps mange $1 billion as a senior market strategist at Delta Global Advisors inc. in Huntington Beach, California. “These are the types of imports that will drive commodities.”

Highest Since November

Copper futures for May delivery surged 8.25 cents, or 5 percent, to $1.747 a pound at on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $1.7525, the highest since Nov. 11.

Among 19 raw materials in the Reuters/Jefferies CRB Index, only gasoline has outpaced copper’s rally in 2009. This year, shares of Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly trader copper producer, have jumped 56 percent, the third-biggest gain in the S&P 500.

“We think copper will be a commodity that does very well,” Baiocchi said.

Crude oil rose to a two-month high in New York on optimism that the recession may end by the close of the year following the Group of 20’s meeting and Bernanke’s interview with CBS Corp.’s “60 Minutes.”

“There are finally signs of an improving economy,” said Ric Navy, a broker at BNP Paribas SA in New York. Crude oil prices “will soon head toward the recent highs and may peak above $50.”

Crude oil for April delivery rose $1.10, or 2.4 percent, to $47.35 a barrel at 2:52 p.m. on the New York Mercantile Exchange, the highest settlement since Jan. 6. Prices have increased 6.2 percent so far this year.

To contact the reporter on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Dakin Campbell in New York at dcampbell27@bloomberg.net.

Last Updated: March 16, 2009 17:01 EDT

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