S&P 500 Pares Gain; Oil Plunges, 30-Year Yields Below 3%

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U.S. Crude Stockpiles
Employees work on a storage tank inside the Chevron Corp. Richmond Refinery in Richmond, California. U.S. crude stockpiles probably expanded by 2.5 million barrels last week to 364.2 million, according to a Bloomberg News survey. Photographer: David Paul Morris/Bloomberg

A rebound in U.S. stocks faded late in the session as energy shares led losses amid a slide in oil, offsetting rallies in small-caps and airlines. Yields on 30-year Treasuries fell below 3 percent for the first time since 2013.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,877.70 at 4 p.m. in New York, after erasing a rally of as much as 1.3 percent. Energy shares in the S&P 500 entered a bear market as Brent crude plunged 4.2 percent to an almost four-year low. The Dow Jones Industrial Average fell less than 0.1 percent, while the Russell 2000 Index surged 1.2 percent. Treasury 30-year yields slid 5 basis points to 2.96 percent amid bets the Federal Reserve will push back the timing on raising interest rates. The dollar rose against most of its peers.

About $744 billion was erased from U.S. equities since Oct. 8 amid concern slower global growth could hurt the economy as the Fed withdraws stimulus efforts. Oil plummeted as the International Energy Agency said demand will expand this year at the slowest pace since 2009. Data in Europe today showed consumer prices in Sweden and Spain fell, U.K. inflation slowed to a five-year low and German investor confidence decreased for a 10th month.

“The last hour has come down to ‘do you want to hold stocks overnight or not?’” Ryan Detrick, a Cincinnati-based strategist at investment research firm See It Market, said by phone. “There’s so much fear and uncertainty and all of a sudden, we’ve seen some big drops in the last few days. There’s a lot of skittishness and concerns out there with headlines on a global slowdown, a recession in Europe, a slowdown in Asia and Ebola.”

Ebola, Oil

The S&P 500 rallied early in the day on speculation the worst three-day selloff since 2011 was overdone. The benchmark lost 4.8 percent from Oct. 8 through yesterday, bringing its decline from an all-time high last month to 6.8 percent. The index closed at its lowest level since May, below its 200-day average for the first time in two years. Declines yesterday were steepest among airlines, which sank on Ebola concerns, and energy shares.

Airlines rebounded 6.3 percent today and the Dow Jones Transportation Average soared 2.6 percent, the most in a year. The rally was also fueled by smaller companies, as the Russell 2000 Index jumped 1.2 percent, its first gain in four days.

Energy companies in the S&P 500 failed to make a similar recovery, dropping 1.2 percent. The group has lost more than 20 percent from an all-time high in June, reaching the common definition of a bear market. Today’s decline weighed on the broader market, briefly dragging the S&P 500 lower in the final hour of trading.

Bear Markets

Brent fell 4.2 percent to $85.13 a barrel, the lowest since November 2010. West Texas Intermediate futures dropped 4.6 percent to $81.84, the lowest in two years. Both measures of crude extended routs after entering a bear market last week.

Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, the Paris-based EIA said in its monthly market report. U.S. crude supplies probably grew by 2.5 million barrels last week, according to a Bloomberg survey of analysts before a report from the Energy Information Administration on Oct. 16.

Oil futures have collapsed as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output.

New Levels

“Demand growth is far underperforming supply growth, and the market is adjusting to a new price level,” Greg Sharenow, executive vice president at Newport Beach, California-based Pacific Investment Management Co., who helps manage $26 billion of commodity investments, said by phone.

The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX, dropped 7.5 percent to 22.76, after jumping yesterday to its highest level since June 2012. About 9.2 billion listed shares changed hands in the U.S., 51 percent higher than the three-month daily average.

Investors analyzed earnings reports today after Alcoa Inc. unofficially kicked off the U.S. results season last week. Some 53 S&P 500 companies are scheduled to release earnings this week, according to data compiled by Bloomberg. Profit for members of the index probably rose 4.8 percent in the third quarter and sales gained 4.2 percent, analysts projected.

Bank Earnings

Bank shares were mixed. Citigroup Inc. rallied 3.2 percent as bond-trading revenue climbed and lending improved. JPMorgan Chase & Co. dropped 0.3 percent after the biggest U.S. bank’s net income fell short of forecasts. Wells Fargo & Co. slipped 2.7 percent as mortgage banking revenue fell from the previous three-month period.

Johnson & Johnson retreated 2.1 percent even as the company raised its full-year forecast. Intel Corp. jumped 1.3 percent in after-market trading as the world’s largest computer-chip maker forecast fourth-quarter sales that may exceed analysts’ estimates.

The Stoxx Europe 600 Index closed little changed, erasing an earlier loss of 1.4 percent. The gauge closed yesterday at the lowest level since February, and is more than 8 percent below a six-year high reached in June.

Iliad SA rallied 9.6 percent as it abandoned a plan to buy a majority stake in T-Mobile US Inc. after an improved bid was spurned by the wireless carrier’s owner Deutsche Telekom AG. Burberry Group Plc dropped 3.7 percent after the U.K.’s largest luxury-goods maker forecast downward pressure on profit margins.

Dollar Strengthens

The euro fell 0.7 percent to $1.2662 after the ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to minus 3.6 in October, the first negative reading since November 2012.

The Bloomberg Dollar Spot Index gained 0.3 percent. It reached a four year high on Oct. 3.

Bonds rose amid speculation that slowing growth will deter central banks from raising interest rates and weaker inflation will preserve the payments on fixed-income assets.

Treasury 30-year yields fell as low as 2.94 percent, the least since May 2013. Two-year note yields dropped 5 basis points, the most in more than a year, to 0.38 percent, while the benchmark 10-year rate declined 7 basis points to 2.21 percent. Trading in cash bonds was closed yesterday for a holiday. Germany’s 10-year bund yield dropped to a record 0.838 percent.

Gold Climbs

Gold rose 0.2 percent, adding to yesterday’s 0.7 percent advance to reach the highest in almost four weeks, as concern that economic growth is slowing spurred demand for a haven.

The ruble weakened 1.1 percent against the dollar, extending declines in the past three months to 16 percent, the worst performance among more than 170 currencies tracked by Bloomberg worldwide. Russia shifted the ruble’s trading band for a seventh day yesterday as slumping oil increased pressure on the currency of the world’s biggest energy exporter.

The Micex Index climbed 0.7 percent. Russia canceled an auction of ruble-denominated bonds scheduled for tomorrow. U.S. Secretary of State John Kerry will hold talks with his Russian counterpart Sergei Lavrov in Paris today as President Vladimir Putin moves to avert further sanctions over the conflict in Ukraine.

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