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Treasuries Drop as U.S. Stocks Gain; Wheat Futures Rally

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Burnt Out Building In Odessa
A man holds flowers as he stands inside the burned trade union building in the southern Ukranian city of Odessa on May 4, 2014. Tussles spread to the Ukrainian city of Odessa, where more than 40 people died in a building fire. Photographer: Anatolii Stepanov/AFP/Getty Images

May 5 (Bloomberg) -- Treasuries fell for the first time in five days, while U.S. stocks advanced as data showed service industries expanded at the fastest pace in eight months. Wheat jumped to the highest level in a year and gold rose as violence spread in Ukraine.

Ten-year Treasury yields added 2 basis points to 2.61 percent as of 4 p.m. in New York. The Standard & Poor’s 500 Index increased 0.2 percent to 1,884.66 as Apple Inc. climbed above $600 a share for the first time since 2012. The rate on Portugal’s five-year note approached a record low. The yen strengthened against most of its 16 major peers. Gold increased 0.8 percent and wheat gained 1.8 percent.

Services, the biggest part of the U.S. economy, picked up in April amid gains in orders and sales that signal even faster growth ahead. Industries ranging from retailers to restaurants and construction companies were among the 14 sectors reporting growth last month as the world’s biggest economy rebounds from a first-quarter stall. The report helped U.S. stocks to erase losses spurred by conflict in Ukraine and data showing a gauge of Chinese manufacturing contracted for a fourth month.

“Investors continue to look for directions,” Joseph Tanious, a global market strategist at JPMorgan Asset Management in Los Angeles, said by phone. His firm oversees $1.6 trillion in client assets. “We’re seeing economic data continue to show modest improvement from first-quarter weather-related numbers. At the same time, you have this ongoing tension between Russia and Ukraine.”

ISM Services

The Institute for Supply Management’s non-manufacturing index rose to 55.2, higher than projected, from the prior month’s 53.1. Readings above 50 indicate expansion. The median forecast of economists surveyed by Bloomberg called for 54 in the gauge for services, which account for almost 90 percent of the economy.

Utility, health-care and energy shares rose at least 0.5 percent for the biggest gains among the 10 main industry groups in the S&P 500, while financial and consumer-staples companies declined.

Apple rose 1.4 percent to $600.96. Amit Daryanani, an analyst at RBC Capital Markets, raised Apple’s 2015 fiscal-year earnings forecast higher by more than $1 a share and pushed his share-price target up by $20 to $645.

JPMorgan Chase & Co. lost 2.5 percent after saying a trading slump has deepened. Pfizer Inc. fell 2.6 percent after reporting first-quarter sales that missed analyst estimates as demand weakened for Lipitor and Viagra.

Wincor Nixdorf AG slid 5.1 percent in Germany after the maker of self-checkout tills in supermarkets posted earnings that fell short of analysts’ estimates.

Inflection Point

Wheat rose as violence in Ukraine spread to the country’s main grain-export port of Odessa, intensifying concerns of supply disruption, and after drought and freezing weather damaged the U.S. crop. Futures in Chicago climbed as much as 3.4 percent to $7.405 a bushel.

“What we’re see seeing now is these geopolitical issues become widespread concerns,” Peter Sorrentino, a senior portfolio manager who helps manage about $3.8 billion at Huntington Funds in Cincinnati, said by phone. “We’re at the inflection point of the market.”

The MSCI Emerging Markets Index lost 0.4 percent, declining for the first time in three days. Russia’s Micex Index retreated 0.5 percent. The Ukrainian Equities Index slid 2.9 percent, falling for a sixth day in the longest losing streak this year.

Government troops were in heavy fighting in Slovyansk, Interfax reported. Ukraine sent special forces from Kiev to Odessa after dismissing the local police for “possibly criminal” actions related to a deadly fire there, Interior Minister Arsen Avakov said on his Facebook account.

Lira, Stocks

Turkey’s lira gained 0.3 percent against the dollar, advancing for an eighth day in the longest rally in four years, after inflation jumped more than forecast. The benchmark index of stocks lost 0.5 percent after closing at the highest level since November.

The Hang Seng China Enterprises Index of mainland shares retreated 0.6 percent, closing at the lowest level since March. The China purchasing managers’ index from HSBC Holdings Plc and Markit Economics Ltd. was 48.1 in April, lower than the preliminary reading of 48.3 and missing the 48.4 projected by economists.

Markets in the U.K., Japan and South Korea were closed today.

Portugal’s bonds rose after Prime Minister Pedro Passos Coelho said the nation’s finances were strong enough to exit its bailout program without a precautionary credit line. Yields on Portugal’s five-year bonds fell four basis points to 2.45 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Michael P. Regan

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