* Wall Street shares dial back from 5-year high
* Euro rises on bets ECB might leave rates alone
* Oil prices slip with stocks, growth view caps losses
* Dollar pulls back from 2-1/2-year high versus yen
By Richard Leong
NEW YORK, Jan 7 Wall Street stock prices
retreated from five-year highs on Monday, while the euro rose
against the dollar on bets the European Central Bank might
refrain from signaling more interest rate cuts on Thursday.
The weakness in the equities market, partly due to caution
ahead of companies beginning to report on their fourth-quarter
earnings, spurred selling of oil, gold and other risky
investments. This stoked some safety bids for U.S. and German
Investors turned their focus to corporate profits in the
last three months of 2012, when growth in American holiday
spending and corporate investments was tepid as shoppers and
companies dialed back on worries about the United States going
over the 'fiscal cliff' - a series of automatic tax hikes and
government spending cuts which could have kicked in if a budget
deal in Washington were not reached last week.
"There is little doubt that concerns about the fiscal cliff
created spending hesitancy in both consumers and businesses in
the fourth quarter, and it is likely that will adversely impact
earnings season," said Randy Frederick, managing director of
active trading and derivatives at Charles Schwab in Austin,
Earnings are expected to be only slightly better than the
third-quarter's lackluster results and analysts' current
estimates are down sharply from what they were in October.
"I think it's going to be a disappointing one this time
around," Peter Cardillo, chief market economist at Rockwell
Global Capital in New York, said of the upcoming earnings season
that unofficially launches with aluminum maker Alcoa
reporting its results after Tuesday's market close.
Uneasiness about corporate profits emerged even after data
on Friday showed U.S. employers kept up a modest pace of hiring
in December and the vast services sector expanded.
Hopes for global economic recovery got a boost after the
Basel Committee of banking supervisors agreed to give banks four
more years and greater flexibility than previously envisaged to
build protective cash buffers. That means they can use more of
their reserves to lend and help economies grow.
In the United States, news of a longer timetable for banks
to manage their capital was overshadowed by 10 banks agreeing to
pay $8.5 billion to settle a federal review of their
questionable foreclosure practices.
In midafternoon trading, the Dow Jones industrial average
was down 74.46 points, or 0.55 percent, at 13,360.75. The
Standard & Poor's 500 Index was down 8.30 points, or 0.57
percent, at 1,458.17. The Nasdaq Composite Index was
down 11.91 points, or 0.38 percent, at 3,089.75.
Among the day's biggest movers were Nationstar Mortgage
Holdings, whose shares rose 12 percent to $37.31 each
after Bank of America entered a deal to sell the
servicing rights on over $300 billion of home loans to
Nationstar and Walter Investment Management.
Walter stock rose 7.2 percent at $47.20.
After touching a 22-month peak last week, the FTSE Eurofirst
index of top European shares ended 0.49 percent lower
at 1,161.57, although the region's bank sector as measured by
the STOXX euro zone bank index bucked the market trend,
gaining 1.5 percent on the Basel news on bank capital.
MSCI's broad world equity index was down
0.35 percent at 346.48, but was still not far from an 18-month
peak scaled when investors returned to the market after the
immediate U.S. fiscal crisis was averted last week.
EURO GAINS BEFORE ECB MEETING
In the currency market, the euro was up 0.31 percent
at $1.3109, erasing early losses. It held above a three-week low
of $1.2998 hit on Friday.
Analysts predicted the single currency would stay around
those levels until after the ECB meeting. Some expect the ECB to
point to the prospect of easier rates early this year,
contrasting with signals from Federal Reserve policymakers that
the U.S. central bank may pursue less-accommodative policies in
The Bank of Japan is also expected to take major steps to
stimulate that country's economy later this month as the new
government aims to end deflation and recession.
The greenback weakened against the yen, last down 0.57
percent at 87.64 yen. Last week, the dollar climbed to a 2-1/2-
year high, which some traders reckoned was overdone.
Expectations of less-easy monetary policy from the Fed later
this year mitigated the renewed safe-haven bids for U.S.
government debt. The yield on benchmark Treasury 10-year notes
was 1.90 percent, little changed from Friday when it
ticked up to an eight-month high.
German Bund futures were up 27 basis points at
143.13, rebounding after hitting one-month lows last week.
The weakness in stocks dragged oil prices lower, but signs
of improvement in the global economy rekindled bets on higher
energy demand in 2013, paring their early losses.
Gold and copper prices were stuck near their session lows.
Brent crude futures were off 11 cents or 0.10
percent at $111.20 per barrel after rising 0.6 percent last
week, while U.S. oil futures were up 7 cents or 0.08
percent higher at $93.16.
Spot gold was down 0.58 percent at $1,646.76 an
ounce, though above Friday's $1,625.79, its lowest price since
Three-month copper futures in London closed 0.2
percent lower at $8,071 a tonne after losing nearly 1 percent
the prior session.