* 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 recedes from 2-1/2-year high vs yen on likely BOJ
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 that 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.
The Dow Jones industrial average closed down 50.92
points, or 0.38 percent, at 13,384.29. The Standard & Poor's 500
Index finished 4.58 points, or 0.31 percent, lower at
1,461.89. The Nasdaq Composite Index ended down 2.84
points, or 0.09 percent, at 3,098.81.
Among the day's biggest movers were Nationstar Mortgage
Holdings, whose shares jumped 16.9 percent to $38.83
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 climbed 8.2 percent at $47.68.
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 0.2
percent at 347.01, but was still not far below 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
in late trading at $1.3115, 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 expected the ECB
to point to the prospect of lower rates early this year from the
current 0.75 percent, contrasting with signals from Federal
Reserve policymakers that the U.S. central bank may pursue
less-accommodative policies in the future.
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 0.49
percent at 87.73 yen. On Friday, the dollar climbed to a 2-1/2-
year high of 88.12 yen based on Reuters data, 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 near 2 percent.
German Bund futures ended up 34 basis points at
143.09, 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 bids for crude
futures, erasing their losses in late trading.
Gold prices fell again and stuck near their session lows.
Brent crude futures finished up 9 cents or 0.08
percent at $111.40 per barrel after rising 0.6 percent last
week, while U.S. oil futures settled up 10 cents or 0.11
percent higher at $93.19.
Spot gold was down 0.56 percent at $1,646.96 an
ounce, though above Friday's $1,625.79, its lowest price since