U.S. shares fell, following yesterday’s worst drop in a month, as financial and technology shares led losses. Emerging-market stocks climbed to a two-month high as Brazilian equities surged. Oil rose while gold slipped.
The Standard & Poor’s 500 Index fell 0.2 percent to 1,849.04 at 4 p.m. in New York as the Nasdaq Composite Index slipped 0.5 percent to close at the lowest level since Feb. 10. The MSCI Emerging Markets Index increased 0.8 percent as the Ibovespa jumped as 3.5 percent, the most since September, and Brazil’s real rose to the strongest level since November. Ten-year Treasury yields fell 1.3 basis points to 2.68 percent. Silver futures capped the longest drop in 13 years and gold reached a six-week low. Oil climbed 1 percent.
U.S. jobless claims unexpectedly fell last week while gross domestic product grew slower than economists estimated in the fourth quarter, reports showed today. Contracts to purchase previously owned U.S. homes unexpectedly fell in February for an eighth straight month. Ukraine reached a preliminary deal with the International Monetary Fund to unlock $27 billion of international support to avert default and limit economic damage from a four-month political crisis.
“A lot of this day-to-day volatility creates this head fake that causes people to be too active,” Jim Kee, president and chief economist of San Antonio-based South Texas Money Management, in San Antonio, Texas, said in a phone interview. His firm oversees about $2.2 billion. “I try to look broader and the broader picture is the U.S. expansion, and frankly continuing global expansion. I have above average confidence that we will log in positive gains 12 months from now, although it’s going to be a bumpy ride in the interim.”
Financial, technology and consumer companies in the S&P 500 fell at least 0.5 percent to lead losses among seven of the 10 main industry groups, as a midmorning recovery fizzled and investors resumed a rotation out of the bull market’s biggest winners. Citigroup Inc. (C) dropped 5.4 percent, the most since 2012, after its capital plan failed Federal Reserve stress tests.
The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility also known as VIX, lost 2.1 percent to 14.62 after surging 6.5 percent yesterday.
The drop in the S&P 500 left it little changed for the year following four straight quarters of gains. Declines this month have been steepest in U.S. stocks that led the five-year-old bull market, with consumer discretionary companies falling 4.3 percent after quadrupling since March 2009. The Nasdaq Biotechnology Index, up more than 300 percent in the last five years, has fallen 11 percent since the end of February, while the Russell 2000 gauge of smaller companies has slipped 2.7 percent after rallying more than 230 percent.
Some of the biggest losses have occurred in technology companies that sold shares to the public in the last few years. Facebook Inc. has slipped 11 percent in March, while Yelp Inc. decreased 17 percent, Twitter Inc. declined 16 percent and Pandora Inc. dropped 20 percent. The Dow Jones Internet Composite Index of 40 companies has lost 8.8 percent this month.
Since reaching a 13-year high on March 5, the Nasdaq Composite has fallen almost 5 percent. Illumina Inc., Netflix Inc., Tesla Motors Inc., Facebook, TripAdvisor Inc. and Baidu Inc. are all down more than 13 percent over that period.
The S&P 500 slipped 0.4 percent yesterday, with losses accelerating in the final hour of trading after the gauge climbed during the morning to within three points of its last record close on March 7.
“The one thing that’s happened lately is some of the speculative parts of the market have been selling off,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said by phone. The firm oversees about $1.9 billion. “Biotech had been really strong last year and the early part of this year, but is now selling off.”
Gross domestic product grew at a 2.6 percent annualized rate from October through December, more than the 2.4 percent gain reported last month, according to the Commerce Department. The median forecast of 79 economists surveyed by Bloomberg called for a 2.7 percent increase.
Jobless claims decreased by 10,000 to 311,000 in the period ended March 22, Labor Department data showed. The median forecast of 49 economists surveyed by Bloomberg called for 323,000 claims.
The index of pending home sales decreased 0.8 percent after a 0.2 percent drop the prior month that was previously reported as a gain, figures from the National Association of Realtors showed today in Washington. The median forecast of 39 economists surveyed by Bloomberg called for a 0.2 percent rise.
“The market is showing some exhaustion trying to find new highs,” David Sowerby, portfolio manager who helps oversee about $200 billion at Loomis Sayles & Co. in Bloomfield Hills, Michigan, said in a phone interview. “The economy overall gets about a C minus. The jobs number has been mediocre at best. When the economy is not improving to the degree that investors had hoped for, you get a market that’s just blah.”
Three rounds of bond purchases from the Federal Reserve have helped fuel economic growth, sending the S&P 500 surging as much as 178 percent from its 2009 low. Fed Chair Janet Yellen said on March 19 that the central bank’s monthly bond purchases could end this fall and benchmark interest rates may rise about six months later.
The gap in yields between U.S. five-year notes and 30-year bonds dropped 5.9 basis points to 180.95 basis points, the least in four years, amid bets the Fed will raise interest rates next year.
The Stoxx Europe 600 Index gained 0.1 percent for a third straight gain. It has dropped 2 percent this month, heading for its biggest decline since June and paring this quarter’s gain to less than 1 percent.
The yield on Ukraine’s April 2023 dollar bond fell to 8.67 percent, a two-month low. A staff level agreement for a two-year loan of $14 billion to $18 billion unlocks $27 billion of international assistance, the IMF said in an e-mailed statement.
Brazil’s Ibovespa climbed the most among major equity benchmarks in the Americas as state-run companies from Petroleo Brasileiro SA to Banco do Brasil SA surged. Brazil’s bonds also rallied and the real strengthened against all 16 major peers as President Dilma Rousseff’s approval rating fell, fueling speculation she may struggle to win re-election after presiding over back-to-back years of sputtering growth.
Russia’s Micex Index of stocks slid 1.3 percent, the most in two weeks on a closing basis. India’s S&P BSE Sensex jumped to a record as financial shares rallied.
New Zealand’s dollar rose to the strongest level since August 2011 against the U.S. currency after the nation posted a larger trade surplus for February than economists forecast.
The euro fell 0.3 percent to $1.3741 and dropped 0.2 percent to 140.37 yen. The yen weakened 0.1 percent to 102.16 per dollar.
The Shanghai Composite Index slid 0.8 percent at the close while Chinese shares in Hong Kong added 0.2 percent. Industrial profits rose 9.4 percent in the first two months of the year, decelerating from 12.2 percent growth in December, according to the National Bureau of Statistics.
West Texas Intermediate oil added 1 percent to $101.28 a barrel, a two-week high, after supplies at Cushing, Oklahoma, the delivery point for the contract, dropped for an eighth week.
Silver futures declined 0.4 percent for a ninth straight loss, the longest slide since February 2001, as signs of an improving U.S. economy cut demand for haven assets. Gold for June delivery slid 0.9 percent to $1,292.20 an ounce, the lowest since Feb. 13. Copper gained almost 1 percent.