Global stocks capped the worst week of the year as commodities slumped and the dollar strengthened amid fresh signs of a slowdown in China and the U.S. housing market.
The commodity collapse that sent gold to a five-year low and pulled crude oil into a bear market isn’t showing any signs of slowing down. The Bloomberg Commodities Index dropped 1.2 percent and the Bloomberg Dollar Spot Index climbed 0.2 percent at 4 p.m. in New York. The MSCI All-Country World Index and the Standard & Poor’s 500 Index both fell more than 1 percent. Emerging-market stocks retreated 1.5 percent.
“We’re seeing commodities and energy sink very low, and you’re seeing profit-taking in some high-multiple health-care names,” Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management, said by phone. “There’s a bit of fear there’s going to be more to this selloff.”
The Bloomberg Commodity Index fell 4.4 percent this week, extending a drop to a 13-year low. The measure has tumbled about 28 percent over the past 12 months amid expanding gluts. Shares of Freeport-McMoRan Inc., the biggest publicly traded copper producer, had the worst week since 2008 as the metal dropped to a six-year low in New York. Brent oil completed its longest run of weekly declines since January.
Fresh evidence of the slowdown in China, the world’s top consumer of metals, grains and energy, helped prices extend losses on Friday. A private gauge of Chinese manufacturing fell to a 15-month low.
In the U.S., purchases of new homes unexpectedly retreated in June and prior readings were revised down, painting a picture of less robust improvement during the industry’s busiest time of year. An index of homebuilders decreased 2.6 percent.
Amid the disappointing economic data, investors sifted through corporate profit reports. The earnings season has been spotty for U.S. companies so far, with sluggish demand overseas damping returns for multinational companies at the same time the dollar has strengthened to near the highest level since April.
From Apple Inc. to Caterpillar Inc. and Microsoft Corp., a parade of blue chips have disappointed investors in the past two weeks. The impact is having the biggest impact on the Dow Jones Industrial Average, giving it the worst week since January.
Analysts are calling for a 4 percent drop in second-quarter profit for S&P 500 companies, shallower than July 10 estimates for a 6.4 percent decline.
Biogen Inc. lost 22 percent today after cutting its 2015 earnings forecast. TripAdvisor Inc. plunged 13 percent after revenue missed forecasts. Amazon.com Inc. surged 9.8 percent after posting a surprise second-quarter profit on top of sales that beat analysts’ estimates. Visa gained 4.3 percent after saying it expects to complete talks to acquire Visa Europe Ltd. by the end of October, and reporting profit that beat predictions.
“Certainly the ongoing collapse in commodity prices emanating from weak data in China and weak earnings reports from companies because of China, such as Caterpillar, are weighing on the market,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc. His firm oversees $351 billion. “We’ve got a pretty big collapse going on here.”
Treasuries gained for a second week as sliding commodity prices kept the market’s inflation outlook at almost its lowest since March.
Federal Reserve Chair Janet Yellen told the Senate Banking Committee last week that she expects to raise rates this year for the first time since 2006, with a gradual pace for subsequent increases. The central bank holds a policy meeting July 28-29.
Longer-dated government bonds across the euro area advanced as the selloff in commodities damped inflation expectations. Germany’s 30-year yield slipped 7 basis points to 1.38 percent, while France’s dropped 8 basis points to 1.89 percent, touching a seven-week low. The Spanish 10-year yield declined four basis points to 1.90 percent.
The dollar gained against 15 of 16 major counterparts. Commodity currencies tumbled, with the Brazilian real and Canada’s dollar touching the lowest in more than a decade.
The MSCI Emerging Markets Index lost 1.5 percent, extending this week’s decline to 3.4 percent. Hong Kong’s Hang Seng China Enterprises Index sank 1.3 percent, falling for a sixth week in the longest losing streak since October. The Shanghai Composite Index also slid 1.3 percent.
The Stoxx Europe 600 Index fell 0.9 percent, capping its first weekly decline in three.
BASF SE lost 4.6 percent after the German chemical maker reported earnings that trailed analysts’ projections. Diageo Plc fell 2.5 percent after it said the Securities and Exchange Commission is looking into its distribution practices in the U.S. Vodafone Group Plc climbed 2.8 percent after reporting service revenue that rose more than analysts estimated.