Treasuries fell, sending 10-year yields up from almost a three-month low, and U.S. stocks ended lower as investors dissected reports showing growth in jobs and acceleration in service industries. Silver and gold paced gains in commodities.
Ten-year yields increased four basis points to 2.67 percent while the S&P 500 slipped 0.2 percent to 1,751.64 at 4 p.m. in New York, trimming an earlier loss of as much as 1 percent. The Stoxx Europe 600 Index increased 0.1 percent and the MSCI Asia Pacific Index advanced 0.7 percent. The S&P GSCI Index of 24 raw materials rose 0.1 percent as coffee jumped 5 percent on supply concerns and silver climbed more than 2 percent. Greek 10-year yields declined 29 basis points on speculation bailout terms will be eased. Japan’s currency rose against 13 of its 16 major counterparts.
Companies in the U.S. boosted payrolls by 175,000 in January, according to a report from ADP Research Institute two days before the government’s monthly jobs data. About $3 trillion has been erased from equities worldwide this year amid a selloff in emerging-market currencies as China’s economy slows and the Federal Reserve cuts stimulus. The improving U.S. economy may warrant faster tapering of quantitative easing, Philadelphia Fed President Charles Plosser said today.
“The data is pretty encouraging; that’s obviously a good thing for the economy as a whole,” Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of 21 primary dealers that trade with the Fed, said of the ISM report. The market is “looking to Friday for direction.”
The private ADP report precedes the Labor Department’s payrolls data on Feb. 7. Payrolls rose 74,000 in December, missing the median analyst projection for an increase of 197,000. The Institute for Supply Management’s non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a survey called for a reading of 53.7. Estimates ranged from 52 to 55. Not including today’s numbers, the index has averaged 53.8 since the recession ended in June 2009.
Plosser, who votes on policy this year, said he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank.
Policy makers made the first two cuts to asset purchases in December and January, slowing to $65 billion a month from $85 billion. While welcoming the trims, Plosser said they “may prove to be insufficient” if growth keeps accelerating.
The S&P 500 is down more than 5.2 percent in 2014 and the Dow Jones Industrial Average has fallen 6.8 percent. Benchmark indexes rebounded yesterday after the S&P 500 slid 2.3 percent on Feb. 3 to close at the lowest level since October.
The stock market’s decline this year is healthy and the S&P 500 probably will end 2014 higher, Leon Cooperman, chairman of hedge fund Omega Advisors Inc., said on Bloomberg Television.
“I say it’s a correction that’s creating some values, which is what we should all be happy about,” Cooperman said on Bloomberg’s “Market Makers” program. “You don’t want to buy stocks at a high, you want to buy stocks when they go down.”
Walt Disney Co. and Nasdaq OMX Group Inc. are among companies reporting earnings today. About 78 percent of the S&P 500 companies that have posted results this earnings season beat analysts’ estimates, data compiled by Bloomberg show.
Among stocks moving today, Cognizant Technology Solutions Corp. fell 4.3 percent on a disappointing forecast. Estee Lauder Cos. dropped 5.5 percent as its quarterly earnings prediction missed estimates. 3D Systems Corp. slumped 15 percent after its projection trailed expectations amid sluggish consumer demand. Genworth Financial Inc. and Radian Group Inc. rallied more than 2.7 percent after posting profits from insuring U.S. mortgages.
Equity volatility declined in Europe, with the VStoxx Index dropping 1.6 percent today. In Asia, the Nikkei Stock Average Volatility Index retreated from the highest level since July. The Chicago Board Options Exchange Volatility Index was up 3 percent today after losing 11 percent yesterday, the most since Dec. 18.
An exchange-traded fund that appreciates as calm is restored to financial markets has never been more popular. About $196 million was added last week to the VelocityShares Daily Inverse VIX (XIV) Short-Term ETN, which rises in value as swings decline, the most since its debut in November 2010, according to data compiled by Bloomberg.
Arabica-coffee futures capped the biggest rally in more than a decade as excess moisture in Indonesia added to supply concerns sparked by drought in Brazil, the world’s biggest grower and exporter. Arabica prices have climbed more than 25 percent in seven sessions, the most since July 2000. Brazil had the hottest January on record, and the least rain for the period in 20 years, according to Sao Paulo-based Somar Meteorologia. This month’s precipitation won’t be enough to replenish dams before the dry season starts in the country by April, according to Somar.
Zinc and aluminum climbed at least 0.7 percent as 20 of 24 commodities tracked by the S&P GSCI Index (SPGSCI) advanced. Natural gas erased earlier gains to drop almost 5 percent while West Texas Intermediate crude oil increased 19 cents to $97.38 a barrel.
Zinc rose 0.8 percent after falling 6.6 percent the past 10 days, the longest streak since at least 1989.
Greek bonds gained after two officials with knowledge of discussions being held by European authorities said the next handout to the country may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid.
The 10-year Spanish yield fell four basis points to 3.72 percent. The rate on similar-maturity Italian securities declined two basis points to 3.76 percent. Portugal’s 10-year yield dropped six basis points to 4.99 percent.
Trading volumes in the Stoxx 600 were 9 percent greater than the 30-day average, data compiled by Bloomberg show. The gauge fell 1.8 percent in the three days through yesterday.
Swatch Group AG climbed 3.9 percent, the most in a year, after the biggest maker of Swiss watches posted full-year profit that beat analysts’ projections. RSA Insurance Group Plc gained 4.7 percent after brokerages from Barclays Plc to Raymond James Financial Inc. upgraded their ratings on the U.K. insurer following the appointment of former Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester.
Hargreaves Lansdown Plc (HL/), the U.K.’s biggest retail broker, fell 10 percent after its operating-profit margin declined. Konecranes Oyj, a Finnish maker of lifting equipment, lost 4.4 percent after its order book fell to an almost three-year low.
Panasonic Corp. (6752) jumped the most since at least 1974, climbing 19 percent after Japan’s biggest maker of consumer electronics posted third-quarter profit that was 68 percent higher than the average estimate in a Bloomberg survey of analysts.
The MSCI Emerging Markets Index slipped 0.1 percent. The gauge has fallen 8.6 percent this year. Russia’s Micex advanced 1 percent, rebounding from the lowest level since Dec. 5, and South Korea’s Kospi gained 0.2 percent, rallying from a five-month low. Taiwan’s Taiex slid the most in 10 months, dropping 2.3 percent, as trading resumed following the Lunar New Year holiday.
The yen gained 0.2 percent to 101.42 per dollar, having touched 100.76 yesterday, the strongest level since Nov. 21. Japan’s currency appreciated 0.1 percent to 137.32 per euro. The dollar weakened against 16 of 24 emerging market currencies tracked by Bloomberg, with the Argentina peso rallying 1.4 percent to lead gains after the central bank placed limits on the amount of foreign currency commercial banks can hold.
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