Euro falls, U.S. stocks retreat as Apple falls

NEW YORK Wed Feb 15, 2012 5:24pm EST

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange February 2, 2012.  REUTERS/Alex Domanski

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange February 2, 2012.

Credit: Reuters/Alex Domanski

NEW YORK (Reuters) - The euro fell and global shares pared gains on Wednesday after a rally that pushed Wall Street to seven-month highs lost ground on mounting concerns about a bailout of Greece and renewed doubts among Federal Reserve officials about the U.S. economy.

U.S. stocks slid for the third session in four, with the market's direction largely dictated by Apple Inc (AAPL.O), the world's largest company by market capitalization. After hitting a record high, Apple closed down more than 2 percent.

A report that said Apple had asked Amazon (AMZN.O) to halt sales of its iPad in China jolted investors, just as minutes of the Fed's last policy meeting were released, sparking fresh risk aversion. An Apple spokeswoman later said Amazon is not an authorized reseller of iPads in China or the United States.

A Chinese technology firm is trying to ban shipments of Apple's tablet in and out of the country in a legal battle over the iPad name.

"Who would have thought that the thing that bothered the market the most was Apple getting too high?" said Larry McMillan, president of McMillan Analysis Corp of Morristown, New Jersey in a report. "For the first time in quite a while, an early rally has degenerated into after selling."

U.S. stocks hugged break-even for most the session but retreated late in the day on Apple's decline. Apple closed down 2.3 percent to $497.67, after hitting yet another record high, at $526.29.

The Dow Jones industrial average .DJI closed down 97.33 points, or 0.76 percent, at 12,780.95. The Standard & Poor's 500 Index .SPX fell 7.27 points, or 0.54 percent, at 1,343.23. The Nasdaq Composite Index .IXIC shed 16.00 points, or 0.55 percent, at 2,915.83.

The euro extended losses against the dollar, falling to a more than one-week low, while the dollar pared losses against the yen. The euro was down 0.5 percent at $1.3067.

A few Fed officials believed another round of central bank bond buying would be needed before long to support the U.S. economy, but others withheld judgment to await more data.

Global stock markets rose as data showing underlying strength in the U.S. economy and signs of economic resilience in Germany and France offset worries about the uncertain prospects for a bailout of Greece.

The MSCI world equity index .MIWD00000PUS gained 0.2 percent.

But European shares, which had hit fresh highs on a Greek commitment to implementing new austerity measures, pared gains on a report euro zone officials were considering delaying the bailout until after Greece holds elections in April.

The FTSEurofirst 300 index .FTEU3 closed up 0.6 percent at 1,075.75 points. Volume was 79.2 percent of the 90-day daily average. The index had been up as much as 1,080.30 after the Greek commitment.

"The market does not like it - if Greece cannot get a bailout by mid-March it effectively has a messy default," said Richard Batty, strategist at Standard Life Investments, which has $248.37 billion of assets under management. "The country must act now to make the extra spending cuts as there is a danger of contagion to the rest of the market if a chaotic default occurs."

Traders said the market could fall by as much as 10 percent if a Greek chaotic default looked certain.

Economic data provided equities an early boost.

Overall U.S. industrial output was unexpectedly flat in January, but a second straight month of gains in the manufacturing component pointed to a strengthening economy, data from the Federal Reserve showed.

Safe-haven U.S. and German government bond prices rose on the possibility of delaying the bailout.

The benchmark 10-year U.S. Treasury note rose 1/32 in price to yield 1.93 percent.

Bund futures were last up 53 ticks on the day at 139.05, and some traders said they could push to around 140 if Greece's fate continues to look uncertain.

Brent oil settled at an eight-month high as fears of supply disruptions from Iran, other Middle Eastern producers and Africa outweighed worries about the global economy.

But concerns about the outcome of Greek bailout talks in Brussels among euro zone officials limited the day's rises.

In London, ICE April Brent crude settled at $118.93 a barrel, gaining $1.58 and posting the highest close since June 14.

U.S. March crude settled at $101.80 a barrel, gaining $1.06, the highest close in a month. Brent's premium against its U.S. counterpart narrowed to $16.79 at the close.

Gold was lifted by crude oil's gains as it broke ranks with the euro and U.S. equities. While seen as a safe haven, the metal has tracked the fortunes of riskier assets in recent months as market turbulence caused by the debt crisis forced investors to sell gold to cover losses elsewhere.

U.S. COMEX gold futures for April delivery settled up $10.40 at $1,728.10.

(Additional reporting by Angela Moon, Ellen Freilich, Gertrude Chavez-Dreyfuss, Gene Ramos and Frank Tang in New York, Doris Frankel in Chicago; Editing by Leslie Adler)

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