Stocks Fall as Slump in Oil Drags on Energy Producers
U.S. stocks fell for a second day, led by commodity producers, as oil plunged on an increase in crude supplies while growth in durable-goods orders trailed estimates. Treasuries fell after demand weakened at an auction.
The Standard & Poor’s 500 Index fell 0.5 percent to 1,405.54 at 4 p.m. in New York. Oil retreated for the first time in four days, losing 1.8 percent to $105.41 a barrel. The yield on the 10-year Treasury note increased two basis points to 2.20 percent. Portugal’s two-year note yield fell for the 10th day, the longest stretch since February 2009, as Italian Prime Minister Mario Monti said the euro crisis is “almost over.”
Crude helped drag the S&P GSCI Index (SPGSCI) of raw materials down 1.2 percent after U.S. Energy Department data showed supplies of oil rose by 7.1 million barrels last week, more than twice the increase forecast by analysts. Federal Reserve Chairman Ben S. Bernanke told ABC News yesterday that the U.S. economic recovery isn’t assured and policy makers don’t rule out any further options to boost growth.
“We got a larger-than-expected 7.1 million barrel build in crude supplies, which certainly sends a message that there is plenty of crude around,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “There were already a lot of bearish factors at work before the report came out.”
Crude in New York declined as much as 2.5 percent after the Energy Department said supplies grew to 353.4 million barrels following the largest increase since July 2010. Prices also fell after French Industry Minister Eric Besson said the U.S. proposed releasing oil from strategic reserves.
All but two of 24 commodities tracked by the S&P GSCI index retreated. Copper declined the most in three weeks, losing 2.3 percent, to $3.7925 a pound. Goldman Sachs Group Inc. cut its three-month outlook on commodities to neutral from overweight.
Chevron Corp., Exxon Mobil Corp. and Occidental Petroleum Corp. paced losses in 42 of 43 energy companies in the S&P 500 (SPX), sending the group down 1.2 percent and contributing the most to the index’s decline among 10 industries. Tyco International Ltd. (TYC) climbed 4.3 percent after Pentair Inc. agreed to combine with its Tyco Flow in a $4.53 billion deal. Pentair rallied 15 percent.
Global stocks are having the best start to a year since 1998, with the MSCI All-Country World Index (MXWD) up 11 percent, on speculation the U.S. recovery will be sustained and Europe’s debt crisis is easing. The S&P 500 has rallied almost 12 percent this quarter. It has slipped less than 0.8 percent from a nearly four-year high reached on March 26.
Industrial companies in the S&P 500 fell 1 percent as a group to help lead losses. Bookings for goods meant to last at least three years advanced 2.2 percent, less than projected, after a revised 3.6 percent decline the prior month, data from the Commerce Department showed. Economists forecast a 3 percent gain, according to the median estimate in a Bloomberg News survey.
Bernanke said unemployment remains too high and it’s “too early to declare victory” for the economy, according to a transcript of the interview with ABC News anchor Diane Sawyer.
“Bernanke confirmed again that the Fed will keep monetary policy accommodative for the foreseeable future and would be prepared to do more should the economy falter later this year,” said Mark Bronzo, who helps manage about $125 billion at Guggenheim Investments, in Irvington, New York. “The equity markets have had a big move but due to the typical window dressing at the end of the quarter we expect the markets to hold on to its gains in the short term.”
Two-year Treasury yields increased one basis point to 0.35 percent, while 30-year rates added one point to 3.31 percent.
Treasury five-year notes attracted the lowest demand at an auction since August as investors questioned whether the economy is faltering enough to merit additional stimulus by the Fed. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 2.85 at the $35 billion sale, down from a 10-auction average of 2.91 and the least since it was 2.71 seven months ago.
Almost five shares fell for each that gained in the Stoxx 600. Anglo American Plc and Xstrata Plc (XTA) lost more than 2.7 percent to lead mining companies lower. Total SA (FP), France’s largest oil producer, fell 1.4 percent after a gas leak from its Elgin platform in the U.K. North Sea entered a fourth day.
The euro appreciated against 13 of its 16 major counterparts, while trading little changed at $1.3320 against the dollar.
European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros ($1.3 trillion) to keep the debt crisis at bay, according to a draft statement written for finance ministers. The euro-area finance chiefs will probably decide at a meeting in Copenhagen March 30 to run the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund, a European official told reporters earlier today in Brussels.
Beyond that, they are also set to allow the temporary fund’s unused 240 billion euros to be tapped until mid-2013 “in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,” according to the draft dated March 23 and obtained by Bloomberg News.
The two-year Portuguese yield slipped 13 basis points to 9.37 percent, falling 3.57 percentage points during the streak. Italian two-year note yields were up one basis point at 2.63 percent as the government sold 8.5 billion euros ($11 billion) of bills at the lowest rate in more than a year.
The MSCI Emerging Markets (MXEF) Index slipped 1.2 percent. The Shanghai Composite Index tumbled 2.7 percent, the most in four months. Jiangxi Copper Co., China’s biggest producer of the metal, said earnings fell 18 percent in the second half and Societe Generale SA said the Asian nation’s corporate profits won’t grow this year. Russia’s Micex Index (INDEXCF) lost 2.2 percent as oil and metals prices retreated.
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