US stocks erased gains as concern that a $61 billion aid package won’t be enough to prevent a default by Greece snuffed out an early rally spurred by better-than-estimated earnings at Apple Inc and Morgan Stanley.
Gilead Sciences Inc., the largest maker of AIDS drugs, declined the most in almost 19 months after cutting its revenue forecast. ConocoPhillips and Chevron Corp paced declines in 33 of 40 energy companies in the Standard & Poor’s 500 Index as oil dropped on an unexpected increase in US supplies and a stronger dollar. Apple Inc rallied as much as 6.4 per cent to a record $260.25 after profit almost doubled and Chief Executive Steve Jobs promised “extraordinary” new products.
The Standard & Poor’s 500 Index slipped 0.2 per cent to 1,205.34 at 12:01 pm in New York after climbing as much as 0.3 per cent. The Dow Jones Industrial Average lost less than 0.1 per cent to 11,116.38. About five stocks dropped for every four that rose on the New York Stock Exchange.
“Greece is a major major problem that everyone is ignoring and maybe now they are waking up,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. “The whole morning rally had weak underpinnings.”
US stocks rose for a second day yesterday as companies from Harley-Davidson Inc to Marshall & Ilsley Corp posted better-than-estimated results and energy producers rallied with crude oil. About 83 per cent of S&P 500 companies that have reported first-quarter results beat the average analyst earnings estimate, according to data compiled by Bloomberg. When 79.5 per cent topped projections in the fourth quarter of 2009, it was the biggest proportion in Bloomberg data going back to 1993.
“Earnings look pretty strong,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees more than $230 billion. “Investors in general are responding to that. Obviously, there’s still some sovereign concern. But fundamentals are good.”
Greek officials joined counterparts from the euro region, the IMF and the European Central Bank to begin hammering out the deficit-cutting measures the nation will have to accept to be able to tap the funds. The government needs to raise about ¤10 billion before the end of May, and its soaring financing costs are lending urgency to the talks.
The yield on Greece’s benchmark 10-year bond surpassed 8 per cent today, the highest in more than a decade and more than twice the comparable German rate, while credit-default swaps on Greece surged 25 basis points to a record 488.5, according to CMA DataVision prices at 11:25 am in London.
Contracts on Portugal jumped 18 basis points to 219, and Spain climbed 6 to 151.2, CMA prices show.
“There’s still concern about a domino effect from the Greece situation,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which manages $8.5 billion. “Are Portugal, Italy or Spain the next ones? In the US, you’re seeing very decent earnings reports. But Europe brings concern about the sustainability of the recovery.”
