U.S. stocks fell, while bonds rallied around the world as a deepening commodities rout and an unexpected drop in American retail sales fueled concern over growth. Copper sank the most since 2011, as crude oil and natural gas climbed.
The Standard & Poor’s 500 Index dropped 0.6 percent by 4 p.m. in New York, paring a slump of as much as 1.7 percent after a Federal Reserve survey indicated gains in consumer spending and as a rally of more than 5 percent in U.S. crude sent energy stocks higher. Copper tumbled 5.3 percent in its ninth straight day of losses, as natural gas futures jumped 9.9 percent, the most since February. The yen gained versus 12 of its 16 major peers, while 30-year Treasury yields slid to a record.
Retail sales fell last month in a broad-based retreat that prompted some economists to cut their U.S. growth forecasts. The Fed’s Beige Book survey showed most regions saw “modest” or “moderate” expansion driven by gains in consumer spending. U.S. financial shares sank after JPMorgan Chase & Co. reported lower earnings. The World Bank cut its global growth outlook amid concern over stagnation in the euro region. Copper’s plunge is reducing the earnings outlook for commodity producers.
“People are starting to get very nervous as commodity prices are faltering and we know it’s because the global growth rate has been brought down,” Tom Stringfellow, president and chief investment officer of San Antonio-based Frost Investment Advisors LLC, which manages about $10 billion, said by phone. “The U.S. alone can’t support the world and the retail sales are a warning shot across the bow. One month isn’t a trend but it does put people on alert.”
The S&P 500 fell to as low as 1,988.44, below its average price for the past 100 days of 2,007.19. After going all of 2014 without a losing streak of more than three days, the index has capped its second slide of at least four straight days in the past 11 sessions. The gauge has tumbled 3.8 percent from a record in that period.
Eight of the 10 of the main S&P 500 groups declined today, with financial shares leading the drop, slipping 1.4 percent as the first of the six major U.S. banks disclosed results.
JPMorgan fell 3.5 percent for the biggest drop in the Dow Jones Industrial Average, which declined 1.1 percent. The largest U.S. bank said fourth-quarter profit fell 6.6 percent, as the sale of a commodities unit pushed fixed-income revenue lower.
Wells Fargo & Co. said expenses rose to the highest level in two years as the lender paid employees more and increased spending on risk monitoring. The shares retreated 1.2 percent.
“The news hasn’t been as rosy as hoped so far,” James Gaul, a portfolio manager at Boston Advisors LLC, which oversees $2.8 billion, said by phone. “Economic data has been fair -- certainly not bad but not great. There’s a little bit of worry going into earnings season. We were at a point where the market was a little bit ahead of itself.”
Stock selling is picking up heading into a U.S. earnings season that has seen analysts cut estimates for results at the fastest rate since the bull market began. Profit is forecast to have grown 2 percent in the final three months of 2014 and increase 2.8 percent for the current quarter, down from analysts’ October estimates of 8.1 percent and 9.2 percent, respectively.
Freeport-McMoRan Inc., the largest publicly traded copper producer, tumbled 11 percent to bring its three-day rout to 21 percent.
Copper for three-month delivery on the London Metal Exchange slid 5.3 percent to $5,548 a metric ton and touched $5,353.25, its lowest intraday price since July 2009. Futures on the base metal sank 5.2 percent, bringing their decline this year to 11 percent as the drop in oil prices make its cheaper for mining companies to boost production, while signs of a Chinese slowdown fuel concern over demand. Nickel dropped more than 2 percent with zinc and lead.
Citigroup Inc. cut its iron ore and coal forecasts amid declining supply costs, a sign the energy rout is feeding through to other commodities. Iron ore delivered to China’s Qingao port fell 0.6 percent in a fourth day of losses today, closing at its lowest price since Dec. 26.
“Oversupply and falling demand are dragging down commodities beyond oil,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, which oversees $325 billion. “There are a lot of uncertainties and it’s hard to see a reversal in sentiment for the time being. As an investor it’s hard to proactively take on risk at the moment.”
Metals miners sank around the world, as basic-resource companies from Australia to South Africa and Europe declined. The Stoxx Europe 600 Index dropped as Rio Tinto Group and BHP Billiton Ltd., the world’s largest mining companies, fell at least 4 percent.
Jiangxi Copper Co., China’s largest producer of the industrial commodity, sank 5.9 percent, the most since May 2012, and KGHM Polska Miedz SA, Poland’s sole copper producer, tumbled 7 percent, the biggest drop since July 2013. Brazil’s Vale SA, the largest exporter of steel-making iron ore, slid 7.1 percent.
Energy shares on the S&P 500 pared a loss of as much as 2.6 percent to end the session up 0.1 percent after West Texas Intermediate crude jumped 5.6 percent to $48.48 a barrel after a three-day selloff of almost 6 percent. WTI reached an almost six-year low Jan. 13.
Crude slumped almost 50 percent last year, the most since the 2008, as OPEC resisted calls to cut output even as the U.S. pumped at the fastest rate in more than three decades. A government report earlier in the day showed that U.S. crude inventories increased to a six-month high as production and imports climbed.
Natural gas for February delivery rose to $3.233 per million British thermal units in New York in its steepest one-day gain since Feb. 19. A blast of arctic weather predicted to swoop into the U.S. signaled stronger demand after a mild December.
U.S. retail sales dropped 0.9 percent in December, the biggest slide since January 2014, following a 0.4 percent gain in November that was smaller than previously estimated, according to the Commerce Department. Electronics and clothing stores were among the nine of 13 major categories that showed a drop in receipts as American consumers decided to save instead of spend the windfall from lower gasoline prices.
“It’s a lot of little factors here that add up to one big mess, frankly,” said Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York. “Think about it like little tremors indicating an earthquake - crude price, copper price, overall index volatility, weakening data, retail sales data. Global growth is threatened.”
Bonds rallied as the drop in metals and oil prices damped the outlook for inflation, boosting the allure of fixed-income assets. Annual inflation in France fell to 0.1 percent in December, the slowest since 2009, data today showed.
The U.S. 30-year yield fell as much as 11 basis points, or 0.11 percentage point, to 2.39 percent today, below the record 2.44 percent set in July 2012. Ten-year Treasury yields dropped five basis points to 1.85 percent. Yields in Japan and Australia, France and the U.K. also fell to record lows.
American bonds have climbed this month as Fed policy makers said they will take a measured approach to raising benchmark interest rates. Longer-dated bonds have returned 5.6 percent this year, according to Bank of America Merrill Lynch Index data, while the S&P 500 has lost 2.3 percent.
The dollar dropped to its lowest level in four weeks against the yen, capping its longest retreat versus Japan’s currency since June, amid speculation the weak retail-sales data pushed back the U.S. rates timeline.
The yen appreciated 0.5 percent to 117.31 per dollar, after touching 116.07, the strongest level since Dec. 16. It climbed 0.4 percent to 138.33 per euro. The euro was little changed at $1.1789 after reaching $1.1727, the least since December 2005.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.3 percent, declining for the first day this week.