Stocks and commodities sank, while Treasuries rose for a second day, as slower-than-forecast growth in U.S. payrolls fueled concern the economic recovery is slowing. The dollar strengthened against 14 of 16 major peers, with the euro setting a two-year low of $1.2266.
The Standard & Poor’s 500 Index slid 0.9 percent to 1,354.67 at 4 p.m. in New York, sending it lower for the week. Treasury 10-year yields fell five basis points to 1.55 percent. Spain’s 10-year yield climbed as much as 26 basis points to 7.04 percent, while the yield on German two-year notes fell below zero. Three-month Euribor, or the rate European banks say they see each other lending in euros, fell to an all-time low. Oil, natural gas and wheat lost more than 3 percent to help lead commodities lower.
Global equities extended losses this morning after U.S. Labor Department data showed payrolls increased 80,000 last month, less than a 100,000 gain forecast in a Bloomberg survey. The European Central Bank yesterday reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month as policy makers tried to revive the global economy.
“There is weakness around the world,” Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said in an interview on Bloomberg Television. “When you are at extremely low levels of policy interest rates, you can’t expect that that’s going to jump-start the economy.”
Alcoa Inc., Hewlett-Packard Co., Caterpillar Inc., Bank of America Corp. and International Business Machines Corp. lost at least 2 percent to lead declines in the Dow Jones Industrial Average.
Informatica Corp. slumped 28 percent, the most in 11 years, after the software provider reported second-quarter earnings and revenue that missed analysts’ estimates. Technology companies fell 1.8 percent as a group, the most among 10 industries in the S&P 500. Teradata Corp. and Citrix Systems Inc. sank more than 7.5 percent for the biggest declines in the S&P 500.
Today’s losses left the S&P 500 down 0.6 percent for the week. The labor report showed the unemployment rate held at 8.2 percent. Private employment, which excludes government jobs, increased 84,000 in June, the weakest in 10 months. Today’s data is the last monthly report before the Federal Reserve’s next policy meeting. The Federal Open Market Committee is scheduled to releases its statement on monetary policy and the economic outlook on Aug. 1.
“The Fed is looking for sustained improvement in the labor market,” John Canally, an economist and investment strategist at LPL Financial Corp. in Boston, said in a telephone interview. The firm oversees about $330 billion. “This report does push the Fed closer to quantitative easing. If the current trend continues, they are almost going to have to do something later this year.”
The government’s previous employment report on June 1 showed 69,000 jobs were created in May, the weakest growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. Since then, the S&P 500 had rallied 7 percent through yesterday and 10-year rates have increased.
The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa Inc. is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.
Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April-June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent.
Earnings at energy companies fell 16 percent to lead the decline among the 10 main groups in the S&P 500, the estimates show, followed by a 12 percent decrease in profits at raw-material producers. Crude oil tumbled 18 percent in the second quarter to drag the S&P GSCI Index of commodities down 13 percent, the worst declines for both since the final three months of 2008.
Five shares fell for each that advanced in the Stoxx Europe 600 Index, which slid 1 percent and trimmed its weekly gain to 1.3 percent. Spain’s largest banks, Santander SA and Banco Bilbao Vizcaya Argentaria SA, fell at least 3.9 percent. Fifteen of 19 groups in the Stoxx 600 retreated. Industrial production decreased for the ninth month in May, the National Statistics Institute in Madrid said.
A gauge of car companies tumbled 3.3 percent to lead declines after PSA Peugeot Citroen reported that first-half deliveries dropped 13 percent from a year earlier and its share of the European market declined. The region’s second-biggest carmaker tumbled 7.7 percent.
The euro extended its weekly loss against the dollar to more than 3 percent, the worst drop since September. The shared currency weakened against 14 of 16 major peer today and 15 of 16 over the last week.
The rate on German two-year notes was at minus 0.01 percent. The euro interbank offered rate, or Euribor, for three-month loans was 0.549 percent, compared with 0.641 percent yesterday, European Banking Federation data showed.
The cost of insuring against default on European sovereign debt rose for a third day, with the Markit iTraxx SovX Western Europe Index of contracts on 15 governments climbing 8.1 basis points to a midprice of 285.5.
Oil in New York dropped 3.2 percent to settle at $84.45 a barrel. Corn ended a 12 percent rally over three days that was due to dry weather crop damage in the U.S., the world’s biggest exporter of the grain. All but five of the 24 commodities tracked by the S&P GSCI Index declined, with natural gas, cocoa, oil, nickel and wheat losing more than 2.5 percent to lead declines.
The MSCI Emerging Markets Index lost 1 percent, trimming its weekly advance to 0.9 percent. The Micex Index fell 1.5 percent in Moscow. Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, dragged South Korea’s Kospi Index down 0.9 percent after sales missed estimates. The Shanghai Composite Index gained 1 percent as shares of developers and industrial companies advanced.