S&P 500 Falls Most Since June; Treasuries Rise With Gold

Photographer: Krisztian Bocsi/Bloomberg

Commodities climbed to the highest since December as extreme weather fueled supply concerns for crops and energy at a time of rising imports by China. Close

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Photographer: Krisztian Bocsi/Bloomberg

Commodities climbed to the highest since December as extreme weather fueled supply concerns for crops and energy at a time of rising imports by China.

The Standard & Poor’s 500 Index (SPX) dropped the most since June and emerging-market stocks extended the worst start to a year since 2009 as data from China to the U.S. signaled a slowdown in manufacturing. Treasuries rose and gold rallied while copper capped its longest slump in 18 years.

The S&P 500 lost 2.3 percent by 4:46 p.m. in New York, extending its 2014 drop to 5.8 percent and closing at the lowest level since October. The MSCI Emerging Markets Index slid 1.1 percent while Japan’s Nikkei 225 Stock Average entered a correction. Ten-year Treasury yields slipped seven basis points to a three-month low of 2.57 percent. Gold climbed 1.3 percent and arabica coffee jumped the most since 2004. Copper futures slid a ninth day in the longest run of declines since 1995.

American factory output expanded in January at the weakest pace in eight months as orders slumped, a sign manufacturing cooled at the start of the year along with the weather. China’s official Purchasing Managers’ Index for manufacturing decreased to a six-month low in January as production and orders slowed. About $2 trillion has been erased from the value of equities worldwide this year as signs of a slowdown in China’s economy and cuts to Federal Reserve stimulus roiled emerging markets.

Photographer: Yuriko Nakao/Bloomberg

Futures on the Nikkei 225 Stock Average, the worst performing gauge among developed markets last month, fell 0.9 percent in Osaka Feb. 1. Close

Futures on the Nikkei 225 Stock Average, the worst performing gauge among developed... Read More

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Photographer: Yuriko Nakao/Bloomberg

Futures on the Nikkei 225 Stock Average, the worst performing gauge among developed markets last month, fell 0.9 percent in Osaka Feb. 1.

“Everyone walked in this year expecting a continuation of at least growing economic activity, and the latest data we’ve been seeing throw a bit of cold water on that theory,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone.

Fed Tapering

The S&P 500 lost 3.6 percent last month for the worst January since 2010 and the biggest monthly decline since May 2012. The Dow Jones Industrial Average is down more than 7 percent in 2014 after sliding 2.1 percent today to a 3 1/2-month low.

Fed policy makers said Jan. 29 that the central bank will trim its monthly bond purchases by $10 billion to $65 billion, cutting the pace of stimulus for a second straight meeting amid improvement in the world’s largest economy.

Three rounds of Fed asset buying helped drive the S&P 500 up as much as 173 percent from a 12-year low reached in 2009 while pushing capital into emerging markets as investors searched for higher returns.

Telephone stocks plunged the most out of 10 groups in the S&P 500 today after AT&T Inc. introduced new service plans, the latest in an escalating price war among wireless carriers. AT&T fell 4.1 percent.

Anadarko, Yum!

Ford Motor Co. and General Motors Co. (GM) fell at least 2 percent after reporting declines in January auto sales that were greater than analysts had estimated. Jos. A. Bank Clothiers Inc. sank 5 percent after management told Men’s Wearhouse Inc. it will not enter takeover talks.

Anadarko Petroleum Corp. (APC) dropped 0.9 percent in extended trading after reporting fourth-quarter earnings below analysts’ estimates. Yum! Brands Inc.’s profit-per-share came in above predictions, fueling a 4 percent gain in their shares after market. More than 79 percent of the S&P 500 companies that have reported results this earnings season exceeded analysts’ projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index jumped 16 percent today to 21.44, the highest level since December 2012 on a closing basis. The gauge of S&P 500 options known as the VIX (VIX) is up 56 percent this year.

After U.S. stocks gained 30 percent last year and almost everything went up, measures of S&P 500 price momentum are slipping just as concern mounts that emerging markets will snuff out the rally.

Technical Indicators

Almost 160 companies in the benchmark gauge for American equities traded below their average level over the past 200 days last week, more than any time last year, when stocks posted the biggest rally since the technology bubble, according to data compiled by Bloomberg. A total of 86 stocks set one-year highs as the index hit a record Jan. 15. That’s down from an average of 112 when peaks were reached in the third quarter.

Weakness in the indicators watched by technical analysts is a sign the investor euphoria is waning after 460 companies in the S&P 500 climbed in 2013, according to Bank of America Corp.

Ten-year Treasury yields declined to the lowest close since Oct. 31. Thirty-year yields decreased seven basis points, or 0.07 percentage point, to 3.53 percent, the least since July.

The Institute for Supply Management’s factory index decreased to 51.3 in January from 56.5 the prior month. Readings above 50 indicate expansion. The median forecast of 85 economists surveyed by Bloomberg called for a decline to 56.

China Slowdown

China’s PMI came in at 50.5 for last month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Feb. 1 in Beijing. The reading in December was at 51. A number above 50 indicates expansion. A separate index released today on non-manufacturing industries fell to 53.4 in January, the lowest reading since at least April 2011.

The government in China has been clamping down on the $6 trillion shadow-banking industry amid rising interbank borrowing costs. Growth in the world’s No. 2 economy held at 7.7 percent in 2013, the same rate as in 2012 and is projected by economists to drop to 7.4 percent this year, the least since 1990.

The Stoxx Europe 600 Index dropped 1.3 percent today while the Nikkei 225 retreated 2 percent in Tokyo, extending declines from its December peak to more than 10 percent. Markets in China, Malaysia, Taiwan and Vietnam were closed for holidays.

Developing Markets

South Korea’s Kospi Index fell 1.1 percent in the first day of trading since Jan. 29 and the won slipped 1.3 percent versus the dollar. Exports contracted 0.2 percent in January from a year before, according to government data released Feb. 1. That compared with a median estimate for a 1.5 percent increase among 12 analysts surveyed by Bloomberg news.

The MSCI gauge for developing-nation stocks has declined 7.8 percent this year.

The Turkish lira weakened, dropping 1.2 percent against the greenback as inflation in the country accelerated to 7.48 percent in January, the fasted pace since October. Turkey’s central bank doubled interest rates last week to try and arrest the lira’s slide.

India’s S&P BSE Sensex (SENSEX) slid 1.5 percent after the government trimmed its 2013 economic growth estimate to 4.5 percent from 5 percent on Jan. 31. Thai stocks rose for a second day and the baht snapped a five-day decline as weekend elections went off without major violence.

European Movers

The Stoxx 600 closed at the lowest level since Dec. 18 after dropping 1.8 percent in January, the worst start to a year since 2010 and the biggest monthly retreat since June.

Lloyds Banking Group Plc lost 4 percent after saying that it set aside 1.8 billion pounds ($3 billion) in the fourth quarter to cover the cost of compensating customers for mis-sold payment protection insurance. Colruyt SA declined 8.8 percent after Belgium’s biggest discount food retailer cut its full-year profit forecast.

Ryanair Holdings Plc (RYA) rallied 6.6 percent. Europe’s biggest discount airline said non-ticket sales rose 13 percent in the fiscal third quarter through December and that bookings for the current period are significantly ahead of a year ago.

The pound weakened 0.8 percent to $1.6310, dropping for a fifth straight day after a report showed U.K. manufacturing expanded less in January than economists had forecast.

The euro gained 0.3 percent to $1.3532 after touching $1.3477, the weakest level since Nov. 22. The yen jumped 1.1 percent to 100.94 per dollar in a second day of gains.

Commodity Markets

U.S. natural gas fell 0.8 percent. The low in Chicago Feb. 12 will rise to 27 degrees Fahrenheit (minus 3 Celsius), 6 above normal, after falling to minus 2 degrees Feb. 5, 21 below normal, according to AccuWeather Inc. in State College, Pennsylvania.

Gold futures for April delivery advanced 1.6 percent to $1,259.90 an ounce, the steepest climb since Jan. 23 amid demand for precious metal regarded as a safe-haven investment.

Arabica coffee extended its bull-market advance as drought drains reservoirs to a record low in Brazil, the world’s biggest grower and exporter. Coffee for March delivery jumped 8.6 percent to $1.3595 a pound, the biggest intraday gain since June 2010 and most for a most-active contract since 2004.

Copper futures sank 0.4 percent to $3.1835 a pound on the Comex in New York. Prices are down 5 percent since Jan. 21 in the longest retreat since December 1995. China is the world’s biggest metal user. Aluminum touched its lowest level since 2009.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

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

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