Commodities rose, U.S. benchmark stock indexes retreated from five-year highs and Treasuries reversed earlier losses as the Federal Reserve maintained its asset-purchase program after the economy unexpectedly shrank.
Zinc, nickel and silver climbed more than 2.6 percent to lead gains in 20 of 24 commodities tracked by the S&P GSCI Index. The S&P 500 Index slipped 0.4 percent to 1,501.96, retreating from the highest level since December 2007. Ten-year Treasury note yields slipped one basis point to 1.99 percent after earlier reaching the highest level since April. The euro strengthened above $1.35 for the first time since 2011.
The Fed said it will keep purchasing securities at the rate of $85 billion a month after the economy paused because of temporary forces including bad weather. U.S. gross domestic product shrank at a 0.1 percent annual rate last quarter, the worst performance since the economy was still mired in a recession in 2009, the Commerce Department reported earlier.
“The underlying trend for the market is upward, but the problem is there is some weakness in the economic numbers that I don’t think investors have fully factored in,” David Kelly, chief global strategist at JPMorgan Funds in New York, said by phone. His firm oversees about $400 billion. “It’s transitory, as the Fed said. But when you put in a negative number on GDP for the fourth quarter, it’s hard for the market to rally.”
The S&P GSCI Index jumped to the highest level since September. Crude oil in New York added 0.4 percent to $97.94 a barrel. Gold futures rallied 1.1 percent to $1,681.60 an ounce after yesterday snapping a four-day slump. The Dollar Index, a gauge of the currency against six major peers, slid 0.4 percent to the lowest since October.
Among U.S. equities, Amazon.com Inc. jumped 4.8 percent after reporting gains in sales and North American operating margins. Chesapeake Energy Corp. surged 6 percent as Chief Executive Officer Aubrey McClendon announced his retirement. Facebook Inc. rose 1.5 percent in the regular session, then tumbled 4.4 percent in extended trading as it reported a drop in profit after the world’s biggest social network ramped up investments in new mobile and ad services that boosted costs.
The S&P 500 had risen 5.7 percent this month through yesterday the best start of a year since 1989, as lawmakers agreed on a budget compromise and companies reported better- than-estimated earnings. The index has more than doubled from a 12-year low in 2009 as the Fed increased its bond purchases to keep interest rates low and spur growth. The S&P 500 (SPX) is less than 4 percent below its record of 1,565.15 set in October 2007, while the Dow is less than 2 percent from its all-time high.
About 75 percent of the 193 companies in the S&P 500 that released results so far in the quarter exceeded profit projections. Sixty-six percent have surpassed sales estimates, according to data compiled by Bloomberg.
The disappointing GDP data overshadowed a private report showing companies in the U.S. added 192,000 workers in January, according to ADP Research Institute. The median forecast of 38 economists surveyed by Bloomberg called for an advance of 165,000. Government data in two days is forecast to show employers added 161,000 jobs last month and the unemployment
“Growth in economic activity paused in recent months in large part because of weather-related disruptions and other transitory factors,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. “Household spending and business fixed investment advanced, and the housing sector has shown further improvement.”
The Stoxx 600 retreated as oil-services companies tumbled after Italy’s Saipem SpA (SPM) cut its profit forecast. Saipem lost 34 percent. Petrofac Ltd. sank 7 percent in London trading, Technip SA retreated 7.1 percent in Paris and Subsea 7 SA declined 5.4 percent in Oslo.
Imperial Tobacco Group Plc sank 4.3 percent as Europe’s second-biggest tobacco company said earnings will drop because of worsening conditions in Europe. Swedbank AB jumped 10 percent after raising its dividend payout ratio to 75 percent of profit as fourth-quarter net income more than quadrupled.
Economic confidence in the euro area rose more than forecast in January, adding to signs that the 17-nation currency bloc may be emerging from a recession. An index of executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said today. That’s the highest since June.
The euro advanced for a second day against the dollar, reaching $1.3587, the highest level since November 2011. It appreciated to as high as 86.07 British pence, also a 13-month high, before trading at 85.86. Against the yen, Europe’s shared currency rose 1 percent.
The yen weakened 0.5 percent to 91.15 per dollar, taking its January loss to about 5 percent. That would be a fourth monthly decline, the longest losing streak since 2008. It reached 91.41 yen per dollar today, the weakest level since June 2010.
The yield on Italy’s 10-year note rose 15 basis points to 4.32 percent as government sold 3 billion euros ($4.1 billion) of 2017 notes and 3.5 billion euros of bonds due in 2022.
The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent, while poised for a third straight monthly gain. The Shanghai Composite Index added 1 percent, extending its bull market. Taiwan’s Taiex index advanced 0.4 percent as securities regulator said the island will double the limit on mainland Chinese institutions’ securities investments. Egyptian stocks jumped 1.5 percent, rebounding from a one-month low, and Russia’s Micex Index slipped 0.4 percent.
Israeli stocks fell for a second day after Stanley Fischer said yesterday he will step down as central bank chief in June. Poland’s WIG20 Index slipped 1.1 percent as Bank Pekao SA tumbled the most since November 2011 after UniCredit SpA said it was selling as much as 9.1 percent of its Polish unit to free capital and increase earnings.
Hellenic Telecommunications Organization SA, the Greek phone company known as OTE, is marketing a benchmark issue of five-year junk bonds that will be priced to yield 8 percent to 8.25 percent. The notes will be the lowest-rated securities from a peripheral European issuer in at least seven years.
The deal comes as the cost of insuring against default on junk bonds climbed, with the Markit iTraxx Crossover index of credit-default swaps on 50 mostly high-yield companies rising six basis points to 439 basis points.
To contact the editor responsible for this story: Lynn Thomasson at firstname.lastname@example.org