U.S. stocks and Treasuries retreated as comments from Federal Reserve Governor Jeremy Stein spurred concern the central bank may begin to reduce stimulus in September. The dollar rallied while gold trimmed its worst quarterly drop on record.
The Standard & Poor’s 500 Index lost 0.4 percent to 1,606.28 after rallying 2.6 percent in the previous three sessions. More than 10 billion shares changed hands in the U.S., capping the busiest month for American stock trading since November 2011. The benchmark 10-year U.S. note yield increased two basis points to 2.49 percent after climbing as much as eight points. Oil slipped for the first time in five days while gold rallied more than 2 percent to trim its second-quarter slide to less than 24 percent. The Dollar Index added 0.3 percent.
The Fed’s Stein said policy makers are providing more clarity about how the Fed will wind down its $85 billion in monthly bond buying as unemployment falls toward 7 percent. If the Fed makes a decision to begin reducing purchases in September, he said, “it will give primary weight to the large stock of news that has accumulated since the inception of the program and will not be unduly influenced by whatever data releases arrive in the few weeks before the meeting.”
“The use of the word September has got people in a bit of a tizzy,” Dan Mulholland, head of Treasury trading at BNY Mellon Capital Markets in New York. “Every other Fed official who’s spoken since Bernanke has been trying to soften his comments, and this is not doing that. The market was leaning a little long anyway, so this might be putting some downward pressure on the market for that reason.”
About $4.2 trillion has been erased from the value of global equities since Fed Chairman Ben S. Bernanke said last month policy makers could pare bond purchases should the economy show sustained improvement. Fed Bank of Richmond President Jeffrey Lacker, who dissented against additional stimulus at every Fed meeting last year, said financial markets will remain volatile as policy makers debate how and when to curtail stimulus.
Stocks rallied yesterday as Fed Bank of New York President William C. Dudley said the central bank may prolong its asset-purchase program if the economy’s performance fails to meet forecasts.
The S&P 500 climbed 0.9 percent this week, trimming its first monthly decline since October to 1.5 percent. The benchmark gauge climbed 2.4 percent in the second quarter, bringing the 2013 rally to 13 percent.
Among stocks moving today, Accenture Plc, the world’s second-largest technology-consulting company, slumped 10 percent after its quarterly sales forecast missed analysts’ estimates. International Business Machines Corp., DuPont Co. and Merck & Co. lost more than 1.7 percent for the biggest declines in the Dow Jones Industrial Average, which lost 115 points. BlackBerry, the Canadian smartphone maker, fell 27 percent in Toronto for its biggest loss of the year after reporting a surprise quarterly loss.
“I’m not surprised to see some pullback from three days of strength,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an interview. “But bulls are still not willing to let things come in too much with the end of quarter today,” he said, adding that the only thing to count on “is continued trader-driven volatility, in both directions.”
U.S. stock trading capped the busiest month since November 2011 and got another boost in volume today before Russell Investments concluded the annual revisions to its equity benchmark gauges. More than 10 billion U.S. shares changed hands today, the second-biggest amount of the year.
About 7.1 billion shares traded on average each day in June, according to data compiled by Bloomberg. Russell’s annual revisions usually spur one of the busiest sessions of the year. Last year’s reconstitution on June 22 helped fuel a jump in volume to 9.73 billion shares, the highest total of the year.
Russell’s global stock indexes, including the Russell 1000 Index and the Russell 2000 Index, are used as benchmarks for $4.1 trillion in assets, according to the company’s website. In three of the previous four years, the reconstitution day ranked in the top 20 busiest trading sessions, data compiled by Bloomberg show.
In the bond market, securities in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index lost 1.7 percent this quarter through yesterday, set for the worst performance since the three months through Dec. 31, 2010. While the average yield on the securities climbed to 1.71 percent from 1.43 percent on March 31, it is still below the mean of 2.06 percent for the past five years.
Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE index fell for a third day yesterday. The measure dropped to 97.13 after reaching 110.98 on June 24, the highest since November 2011. It has averaged 62.53 this year.
The dollar strengthened against 12 of 16 major peers and the Dollar Index, a gauge of the currency against six major counterparts, rose 0.3 percent for its eighth increase in 10 sessions.
The euro is the best performer of the major currencies in the past quarter, with a 1.5 percent advance versus the dollar. Australia’s currency tumbled more than 12 percent.
The JPMorgan Global FX Volatility Index was little changed at 11 percent after touching 11.96 percent on June 24, the highest since June 2012. The average for 2013 is 9.19 percent.
The Stoxx 600 advanced 1.7 percent this week, the biggest gain since the week ended May 3. The volume of shares changing hands in Europe today was in line with the 30-day average, according to data compiled by Bloomberg. Finmeccanica SpA climbed 1.3 percent today after Italy’s largest arms company reached an agreement with unions over jobs cuts.
The Stoxx 600 slumped 5.3 percent in June, the first monthly decline in more than a year. The benchmark measure retreated 3 percent in the second quarter, trimming its 2013 advance to less than 2 percent.
The MSCI Emerging Markets Index rose 2.3 percent and lost 6.8 percent in June, the biggest monthly drop in more than a year. The Shanghai Composite Index gained 1.5 percent, rebounding from a four-year low. China’s seven-day repo rate fell 61 basis points to 6.13 percent today, according to a weighted average compiled by the National Interbank Funding Center. It reached a record 12.4 percent June 20 and rose 132 basis points this month amid a shortage of cash.
Chinese central bank Governor Zhou Xiaochuan said the nation will maintain market stability and adjust policies at the right time, his first comments since a record cash squeeze.
The State Bank of Vietnam weakened its reference rate by 1 percent to 21,036 dong per dollar. The currency, which is allowed to trade up to 1 percent on either side of the fixing, fell 0.9 percent to 21,205. The reference rate had been kept at 20,828 since 2011 and the spot rate sank to a record 21,036 most days this month, the lower limit of the trading band.
The S&P GSCI gauge of 24 commodities lost 0.7 percent, leaving it lower for the month. Gold for immediate delivery jumped 2.2 percent to $1,227.05 an ounce, rebounding from a 34-month low and paring its quarterly drop to almost 23 percent, the most since at least 1920.
Corn for December delivery tumbled 5.1 percent after the U.S. Department of Agriculture said farmers planted the most acres since 1936 as growers responded to low stockpiles. Wheat lost 2.4 percent.