Stocks Drop on Jump in Jobless Claims
The U.S. faces a 25 percent chance of deflation and a double-dip recession, according to Pacific Investment Management Co. CEO Mohamed A. El-Erian. Photographer: Joshua Roberts/Bloomberg
Aug. 5 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks slipped, pulling the Standard & Poor’s 500 Index down from an almost three-month high, as an unexpected increase in jobless claims fueled concern the economic recovery is slowing. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
Aug. 5 (Bloomberg) -- Keith Springer, president of Capital Financial Advisory Services, talks about his investment strategy. Springer also discusses the outlook for U.S. stocks and corporate bonds. He speaks with Matt Miller, Lizzie O'Leary, Adam Johnson and Dominic Chu on Bloomberg Television's "Street Smart." John Brady, senior vice president of MF Global Inc., also speaks. (Source: Bloomberg)
Aug. 5 (Bloomberg) -- David Abella, portfolio manager at Rochdale Investment Management, talks about the outlook for U.S. retail sales. Retailers reported July sales gains that missed analysts’ estimates as consumers cut spending ahead of the back-to-school season. Abella talks with Lizzie O'Leary and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Aug. 6 (Bloomberg) -- Stephen P. Wood, chief market strategist at Russell Investments, talks with Bloomberg's Susan Li about his investment strategy. Speaking from New York, Wood also discusses the U.S. economy and job market. U.S. stocks slipped, pulling the Standard & Poor’s 500 Index down from an almost three-month high, as an unexpected increase in jobless claims fueled concern the economic recovery is slowing. (Source: Bloomberg)
Aug. 5 (Bloomberg) -- Michael Englund, chief economist at Action Economics LLC, talks about the outlook for tomorrow's July U.S. jobs report. Englund, speaking with Scarlet Fu and Michael McKee on Bloomberg Television's "In the Loop With Betty Liu," also comments on today's report on initial jobless claims for the week ended July 31. (Source: Bloomberg)
Aug. 5 (Bloomberg) -- Philip Manduca, head of investment at ECU Group Plc, talks about his investment strategy for currencies and gold. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Aug. 5 (Bloomberg) -- Poul Thomsen, the International Monetary Fund's mission chief in Greece, talks about the country's ability to meet its commitments to the 110 billion-euro bailout package from the IMF and European Union. He speaks from Athens with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Aug. 5 (Bloomberg) -- Bloomberg's Sara Eisen reports on concerns the U.S. could follow in Japan's footsteps and experience a "lost decade," as the Asian country did in the 1990s. U.S. Treasury Secretary Timothy Geithner and Milton Ezrati, a senior economic strategist at Lord Abbett & Co., dispute the fears. (Source: Bloomberg)
Stocks fell and Treasuries rallied as an unexpected jump in American jobless claims fueled concern the economic rebound is slowing. The yen strengthened and wheat jumped to a 23-month high.
The Standard & Poor’s 500 Index slipped 0.1 percent to 1,125.81 at 4 p.m. in New York, paring losses of as much as 0.8 percent. The Stoxx Europe 600 Index declined 0.3 percent after earlier climbing as much as 0.6 percent. Ten-year Treasury yields slid 5 basis points to 2.9 percent. The Japanese yen rose against all but one of its 16 most-traded peers. Wheat futures jumped as much as 7.9 percent as Russia banned exports amid the worst drought in at least a half century.
The S&P 500 retreated from the highest levels since mid-May after initial jobless claims increased by 19,000 to 479,000 last week, the most since April and exceeding the highest estimate of economists surveyed by Bloomberg News. Government data tomorrow is forecast to show the unemployment rate rose to 9.6 percent.
“What the jobless claims numbers should tell us is that employers lack the confidence to expand their production because they’re uncertain how much momentum is out there,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $63 billion. “Businesses are interested in maintaining margins because they are not sure about the strength of future top-line growth.”
Jobs Concern
The U.S. economy has expanded for four straight quarters after shrinking for five of the previous six as the collapse of the subprime mortgage industry triggered the worst contraction since the Great Depression. Growth slowed to 2.4 percent in the first quarter from 3.7 percent at the end of 2009, spurring concern the nation is at risk of entering another recession as government stimulus programs expire.
Economists forecast the jobless claims would fall to 455,000, according to the median of 43 projections. The Labor Department data comes a day before the July payrolls report, which may show the economy shed 65,000 jobs last month, according to the average of 81 economists surveyed by Bloomberg.
The U.S. faces a 25 percent chance of deflation and a double-dip recession, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co.
American Express Co., Pfizer Inc. and Microsoft Corp. fell at least 1.4 percent to lead the Dow Jones Industrial Average down 5.52 points, or 0.1 percent, to 10,674.91. J.C. Penney Co. and Big Lots Inc. lost more than 6.5 percent for the biggest declines in the S&P 500 after sales trailed estimates.
S&P Rally
The S&P 500 has rallied more than 10 percent since July 2 as profits top analyst estimates at most companies reporting second-quarter results. Earnings per share have grown 53 percent on average for the 404 companies that reported since July 12, according to data compiled by Bloomberg. Seventy-nine percent have beaten estimates. Sales have grown 9.7 percent, while trailing analysts’ estimates by 1.4 percent on average.
The MSCI World Index of stocks in 24 developed nations rose 0.1 percent. The MSCI Asia Pacific Index rallied 0.7 percent, led by Japanese equities after Toyota Motor Corp. raised its profit forecast. Aviva Plc, the U.K.’s second-biggest insurer, climbed 7.2 percent after profit topped analysts’ estimates. Barclays Plc slipped 4.7 percent after reporting a drop in revenue at its investment-banking unit. Unilever Plc, the world’s second-biggest consumer-goods maker, fell 5 percent in Amsterdam after sales missed forecasts.
Europe’s Recovery
Europe’s economy is recovering faster than forecast and money markets are improving, European Central Bank President Jean-Claude Trichet said today in Frankfurt, paving the way for the ECB to phase out liquidity tools used to fight the financial crisis. The euro gained 0.2 percent to $1.3181.
The yen appreciated 0.6 percent against the dollar and 0.4 percent against the euro. The New Zealand dollar weakened against all 16 major currencies, losing at least 1.2 percent against the yen, Swiss franc and Swedish krona after the nation’s jobless rate rose more than economists forecast.
Wheat futures rose 7.9 percent to $8.1525 a bushel in Chicago and earlier reached $8.155, the highest price in almost two years. The Russian heat wave, excess rain in Canada and dry weather in Kazakhstan, Ukraine and parts of Europe are draining stockpiles.
Russia’s drought also helped send corn futures to a 13- month high and soybeans extended a rally to the highest price since January. Shares of U.S. agricultural companies rallied. Archer Daniels Midland Co., the world’s largest grain processor, and Monsanto Co., the biggest seed producer, jumped at least 3.1 percent each.
August pork-belly futures surged to a record $1.185 a pound, jumping the exchange-limit 4.5 cents in Chicago, amid plunging U.S. inventories of the meat used to make bacon.
Crude oil for September delivery declined 38 cents, or 0.5 percent, to $82.09 a barrel on the New York Mercantile Exchange. Copper futures for September delivery fell 6.2 cents, or 1.8 percent, to $3.3425 a pound on the Comex in New York. Yesterday, the contract reached $3.4105, the highest price since April 29.
To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
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