Stocks, Commodities Slump After U.S. GDP Report

Photographer: Victor J. Blue/Bloomberg

The U.S. economy probably grew 3 percent in the first quarter after expanding 0.4 percent in the final three months of 2012, economists said before a Commerce Department report today. Close

The U.S. economy probably grew 3 percent in the first quarter after expanding 0.4... Read More

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Photographer: Victor J. Blue/Bloomberg

The U.S. economy probably grew 3 percent in the first quarter after expanding 0.4 percent in the final three months of 2012, economists said before a Commerce Department report today.

U.S. stocks snapped a five-day streak of gains, commodities fell and the dollar slid as data showed the American economy grew less than forecast. Treasuries rose, pushing 10-year yields down the most in two weeks.

The Standard & Poor’s 500 Index slid 0.2 percent to 1,582.24, paring a loss that earlier reached 0.5 percent. Losses in oil and copper helped lead the S&P GSCI gauge of 24 commodities to a 0.5 percent decline. The greenback retreated against most of its 16 most-traded peers, losing 1.2 percent to 98.05 yen. Treasuries advanced, sending 10-year yields four basis points lower to 1.66 percent.

The U.S. economy expanded 2.5 percent in the first quarter, less than the 3 percent forecast in a Bloomberg survey, after growing 0.4 percent in the final three months of 2012, Commerce Department data showed. The Thomson Reuters/University of Michigan final April index of consumer sentiment fell to a three-month low as Americans grew more pessimistic about the economy. The BOJ kept its vow to double the monetary base without outlining any additional measures to reach its inflation target.

“The GDP number does show that the U.S. economy is still in a slow growth mode, albeit slightly below expectations,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by telephone. His firm manages $110 billion. “I still like the risk reward for equities but it’s a ride the highs, buy the dips market. The market’s a little ahead of itself and frankly we’re due for a pause.”

Photographer: Yuriko Nakao/Bloomberg

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Photographer: Yuriko Nakao/Bloomberg

A dealer looks at monitors next to U.S. and Japanese national flags a foreign exchange brokerage in Tokyo.

Earnings Season

The S&P 500 gained 1.7 percent for the week. Sixteen companies in the index released results today. Of those that have reported so far this season, 74 percent topped profit projections while 54 percent missed sales estimates, according to data compiled by Bloomberg.

Analyst are turning more bullish on corporate earnings. Profit at S&P 500 companies gained 1.1 percent in the first three months of the year, according to analysts’ projections compiled by Bloomberg. That compares with last week’s projection for a decline of 1.1 percent.

Amazon.com Inc. (AMZN) fell 7.2 percent as a second-quarter earnings forecast from the world’s largest online retailer missed analyst projections. J.C. Penney Co. jumped 12 percent after billionaire investor George Soros disclosed a passive stake in the retailer.

Economic Growth

The S&P 500 has surged 134 percent from a 12-year low in 2009 as corporate earnings beat analyst estimates and the Federal Reserve embarked on three rounds of bond purchases to spur economic growth. The benchmark gauge is up 0.8 percent in April. Both the S&P 500 and the Dow Jones Industrial Average reached record highs on April 11.

Fed policy makers have said they will maintain stimulus until the labor market improves “significantly.” The economy’s inability to sustain faster growth means central bankers will probably affirm a pledge to keep buying bonds when they meet next week. The Labor Department releases its monthly jobs report on May 3.

Global stocks rallied this week as speculation mounted the European Central Bank will cut rates when it meets on May 2. Thirty six of 61 economists in a Bloomberg News survey have predicted that the central bank will lower its benchmark rate to 0.5 percent from 0.75 percent.

“If you were to pick one thing people are worried about right now, it’s will or won’t the ECB cut rates,” John Canally, investment strategist at Boston-based LPL Financial Corp., which has $373 billion in advisory and brokerage assets, said by telephone. “Most people think yes, but if the ECB disappoints, it could be difficult.”

Copper, Oil

The S&P GSCI gauge rose 2.4 percent this week, the biggest advance since February. Copper declined 1.7 percent to $3.186 a pound on the Comex. West Texas Intermediate crude fell 0.7 percent to $93 a barrel today.

Gold tumbled from the highest in more than week as the GDP report crimped demand for the precious metal as a hedge against inflation. Gold futures lost 0.6 percent to $1,453.60, retreating for the first time in three days and reversing an earlier advance of as much as 1.6 percent.

Mining and energy companies led losses in the Stoxx 600, paring the gauge’s weekly rally to 3.7 percent. PPR SA, the luxury-goods company that plans to change its name to Kering in June, sank 6.7 percent for the biggest drop since 2009 after revenue trailed analysts’ projections. YIT Oyj slid 8 percent, its biggest loss in 18 months, as the Finnish construction company reported earnings that missed estimates.

Possible Cut

“On the one hand, the market got excited about a possible rate cut by the ECB,” Mark Andersen, who helps oversee $1.7 trillion as co-head of asset allocation at UBS AG in Zurich, said in a telephone interview. “On the other hand, quarterly results have reminded us that the European economy is not in a great spot.”

The yen rose at least 0.8 percent against all 16 of its major counterparts as BOJ Japan Governor Haruhiko Kuroda and his fellow board members concluded their second policy meeting this month. The Japanese currency has strengthened 1.6 percent this week against the dollar.

The euro weakened 1.1 percent to 127.67 per yen and gained 0.2 percent to $1.303. Sweden’s krona climbed versus all its major peers except the yen after a report showed consumer confidence exceeded analyst estimates.

The MSCI Emerging Markets Index slipped 0.4 percent, trimming this week’s gain to 1.2 percent. India’s S&P BSE Sensex slid 0.6 percent and South Korea’s Kospi index lost 0.4 percent. The Shanghai Composite Index sank 1 percent, capping a 2.6 percent retreat in April. China’s financial markets will be shut from April 29 through May 1.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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