Most U.S. stocks fell as a late-day slump in banks and technology shares wiped out an early rally triggered by China’s first interest-rate cut since 2008. Oil slid, while Treasuries rose and the dollar was little changed.
About three stocks dropped for every two that gained on U.S. exchanges and the Standard & Poor’s 500 Index erased a rally of as much as 1.1 percent to close down less than 0.1 percent at 4 p.m. in New York. Bank of America Corp. and Oracle Corp. paced losses in lenders and computer companies. Oil, which surged as much as 2.4 percent this morning, slipped 0.2 percent to $84.82 a barrel in the regular session and extended declines to as much as 1.9 percent in after-hours trading. The 10-year U.S. note yield lost two basis points to 1.64 percent.
Equities began paring gains at 10 a.m. New York time, while Treasuries turned higher and commodities slid, as Federal Reserve Chairman Ben S. Bernanke said the central bank will need to assess conditions before deciding if more measures are needed to stoke an economy threatened by Europe’s debt crisis and U.S. budget cuts. The S&P 500 lost its entire gain by the final 15 minutes of trading as the Associated Press reported that a municipal strike threatens to derail a June 17 Greek election that could determine the nation’s future in the euro.
“It’s disappointing that the markets were not able to sustain the momentum established by the Chinese action,” said Peter Jankovskis, who helps manage about $2.8 billion at Oakbrook Investments in Lisle, Illinois. “Bernanke’s comments weren’t indicative of a Fed that will take aggressive action in the near future. They didn’t match to expectations. There’s also concern about the upcoming Greek election. We’ll have to wait and see how all that plays out.”
Stocks rallied earlier as the People’s Bank of China said it will lower its benchmark lending and deposit rates effective tomorrow.
The S&P 500 (SPX) retreated after staging its biggest advance of the year yesterday, a 2.3 percent surge triggered by speculation global policy makers will act to spur growth. The index has rebounded almost 3 percent from a five-month low on June 1, recouping its losses from a report last week showing U.S. jobs growth in May was the weakest in a year.
Bank of America Corp. (BAC) and Hewlett-Packard Co. dropped at least 1.3 percent for the biggest declines in the Dow Jones Industrial Average, which trimmed a rally of as much as 140 points to 46 points by the close. Newmont Mining Corp. slumped 2 percent as gold tumbled the most in two months after Bernanke reduced speculation of more quantitative easing.
“Sometimes investors look for their Christmas gifts in June,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “China’s action helps to calm some of the investors’ fears. Yet Bernanke is throwing some cold water on expectations for QE3. Maybe the Fed will deliver that ahead of December, but I think we’d need to see a lot more deterioration in the economy before that happens.”
Bernanke on June 19-20 will lead the Federal Open Market Committee in a policy-setting meeting confronting the slowest employment growth in a year and a worsening debt crisis in Europe. The U.S. added 69,000 jobs last month, the fewest in a year, even as the Fed maintained record stimulus. Bernanke today also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law -- the so-called fiscal cliff -- would, if allowed to occur, pose a significant threat to the recovery.”
In his prepared comments, Fed chairman didn’t call for consideration of additional stimulus, a contrast with speeches yesterday in which Vice Chairman Janet Yellen said the economy “remains vulnerable to setbacks” and may warrant more accommodation.
First-time claims for jobless benefits fell by 12,000 to 377,000 in the week ended June 2 from a revised 389,000 the prior week that was higher than initially estimated, the Labor Department said today. The median estimate of 49 economists surveyed by Bloomberg News called for 378,000 claims.
Shares of smaller U.S. companies foreshadowed this week’s gains in stocks as they did when the worst bear market since the Great Depression ended, according to Andrew Wilkinson, a Miller Tabak & Co. strategist.
The Russell 2000 Index (RTY)’s dividend yield, based on companies’ payouts during the past 12 months, was 30 basis points higher than the rate on 10-year Treasury notes at the end of last week. The gap was the widest since March 9, 2009, the day that the gauge bottomed out after a 59 percent plunge in 17 months.
Four shares rose for every one that declined in the Stoxx 600. Sweden’s OMX Index jumped 3.2 percent, the most since November, as the market reopened after a public holiday. A European gauge of banks rose 2 percent.
Johnson Matthey Plc (JMAT) climbed 4.9 percent after the maker of a third of all autocatalysts reported a 74 percent jump in full- year profit and said that it will pay a special dividend. Tullow Oil Plc added 2.1 percent after saying it discovered crude at its offshore Ivory Coast well.
The Spanish 10-year bond yield slid 19 basis points to 6.09 percent after the nation sold 2.07 billion euros ($2.6 billion) of bonds, more than its maximum target of 2 billion euros. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments decreased four basis points.
The extra yield investors demand to hold Spanish 10-year bonds instead of benchmark German bunds declined 23 basis points to 471 basis points, or 4.71 percentage points. The 10-year Italian yield rose four basis points to 5.71 percent, while the similar-maturity Swedish yield jumped 31 basis points to 1.45 percent.
After European markets closed, Fitch Ratings lowered Spain’s debt to BBB from A, leaving it two notches from junk with a negative outlook. The ratings firm cited the cost of recapitalization the nation’s banks and a lengthening recession.
France’s 10-year bond yield rose 16 basis points to 2.57 percent even as borrowing costs fell at an auction. The country issued 3.48 billion euros of the benchmark bond at an average yield of 2.46 percent, lower than the 2.96 percent at the last sale on May 3.
The euro was stronger versus eight of 16 major peers and swung between gains and losses below $1.26 against the dollar.
The S&P GSCI gauge of 24 commodities lost 0.2 percent, erasing a rally of as much as 1.6 percent after Bernanke’s remarks. Cotton, soybeans and nickel rallied at least 3 percent for the biggest gains, while natural gas and silver fell more than 3 percent. Gold for August delivery fell 2.8 percent to settle at $1,588 an ounce in New York, the biggest decline for a most-active contract since April 4.
The MSCI Emerging Markets Index (MXEF) rose 1.2 percent and rose 3.5 percent in three days, its biggest rally since February. India’s Sensex Index jumped 1.2 percent after Prime Minister Manmohan Singh pledged yesterday to revive growth through infrastructure spending. South Korea’s Kospi index rallied 2.6 percent as the market re-opened after a holiday yesterday. Benchmark gauges in Russia, the Czech Republic and the Philippines gained more than 1 percent.
Analysts are favoring stocks in developed countries over their emerging market rivals by the most since 2009, betting their global reach will provide a cushion during a weakening recovery.
Securities firms have boosted average rankings in the 24- country MSCI World Index of advanced nations during the second quarter after cutting recommendations worldwide for seven months, according to data compiled by Bloomberg from more than 62,000 ratings. They lowered developing countries during the period, in which $6.3 trillion was erased from global equities.
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