Oil fell from a 30-month high after the International Monetary Fund cut its growth forecasts for the U.S. and Japan, dragging down shares of energy producers and the Standard & Poor’s 500 Index. The difference between yields on Treasury 10-year notes and inflation-protected securities widened to the most in three years.
Crude futures slumped 3.2 percent to $109.16 a barrel at 4 p.m. in New York after settling at $109.92. The S&P 500 lost 0.3 percent to 1,324.46 as energy companies in the index fell 1.9 percent, with Anadarko Petroleum Corp. losing 4.4 percent. The yield gap between 10-year notes and Treasury Inflation Protected Securities increased to as much as 2.67 percentage points, the most since March 2008. The yen gained versus its 16 major counterparts after a 6.6-magnitude earthquake in Japan.
The IMF reduced its forecast for U.S. growth in 2011 to 2.8 percent from 3 percent, citing oil prices at the highest levels since 2008 and the pace of job creation in the world’s biggest economy. The Washington-based lender cut its Japan projection to 1.4 percent from 1.6 percent. In the Treasury market, break-even rates widened before reports this week forecast to show growth in consumer prices is accelerating. Alcoa Inc. fell 0.8 percent before reporting quarterly results after markets close today.
“Investors are using the IMF report as an excuse to drift lower before we get more information from company earnings,” said Michael Gibbs, Memphis, Tennessee-based chief equity strategist at Morgan Keegan Inc., which has $80 billion in client assets. “What we don’t know is how much the Japanese earthquake is going to affect earnings, and we want to hear how companies’ guidance is going to be impacted by the higher energy prices.”
Futures also dropped after the African Union said Libyan leader Muammar Qaddafi agreed to a cease-fire plan. Oil had surged 32 percent to $112.79 a barrel in the past year.
The S&P 500 declined for a third straight day as energy companies slumped. The benchmark measure of U.S. shares fell 0.3 percent last week, ending a two-week winning streak that had added 4.2 percent.
Anadarko Petroleum and Occidental Petroleum Corp. slumped at least 3.1 percent as oil fell. General Motors Co. retreated 2.4 percent after China said 2011 car sales may grow more slowly than estimated. Tyco International Ltd. rose 3.3 percent as people with knowledge of the matter told Bloomberg News that Schneider Electric SA is weighing a takeover offer for the maker of security systems.
The S&P 500 rose 5.6 percent in 2011 through April 8 amid government stimulus measures and as corporate profits beat analysts’ estimates for an eighth straight quarter. Earnings for S&P 500 companies rose 12 percent in the first quarter and will increase 17 percent this year, according to analyst estimates compiled by Bloomberg.
Alcoa reported first-quarter profit excluding some items of 28 cents following the close of U.S. exchanges, becoming the first Dow Jones Industrial Average company to post results for the period. It beat the average analyst estimate of 27 cents.
Global gross domestic product will grow 4.4 percent in 2011, matching the previous estimate, according to IMF’s World Economic Outlook report. Consumer spending, the biggest part of the U.S. economy, faces headwinds from the rising cost of food and gasoline. Federal Reserve officials last month said the expansion is on “firmer footing,” lessening the need to extend a bond purchase program beyond June.
“Recovery in the labor market remains lackluster,” the IMF said in the report. “The drag on 2011 growth from oil price increases largely offsets the boost from the Federal Reserve’s unconventional policies and from stronger net exports.”
The yield difference for 10-year TIPS and comparable Treasuries, a gauge of trader expectations for consumer prices over the life of the debt known as the break-even rate, was 2.65 percentage points after reaching 2.67 points earlier.
Yields on 10-year Treasuries traded at almost a seven-week high as the U.S. prepared to sell $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three auctions starting tomorrow. Federal Reserve policy makers William Dudley and Janet Yellen spoke against removing record stimulus, citing high unemployment.
The yen rose from an 11-month low against the euro after an aftershock of Japan’s March 11 earthquake discouraged demand for higher-yielding assets. The dollar remained lower versus the yen as Yellen said the gain in food and fuel costs doesn’t warrant a reversal of monetary stimulus. The euro fell against the dollar on speculation the European Central Bank’s recent interest-rate increase may make it harder for nations including Ireland and Portugal to contain debt.
The yen gained 0.6 percent to 122.04 against the euro, from 122.76 on April 8, reversing an earlier slide to 123.33, the weakest level since May 5. Japan’s currency appreciated 0.2 percent to 84.60 per dollar, from 84.76, after touching 85.53 on April 6, the weakest level since Sept. 21. The euro decreased 0.4 percent to $1.4426, from $1.4483, after reaching $1.4489 on April 8, the highest level since January 2010.