U.S. Stocks End Higher as Treasuries Hold Gains Before Jobs Data

  • S&P 500 adds to end-of-quarter rally in choppy trading
  • Crude advance evaporates, copper leads losses in metals

U.S. stocks erased a steep drop in afternoon trading, while Treasuries and crude oil meandered as investors awaited a report on the American labor market that’s likely to influence expectations on the outlook for interest-rate hikes.

The Standard & Poor’s 500 Index rallied back from a slump of more than 1 percent to post its third straight day of gains. The advance added to an end-of-quarter rally that helped pare its worst performance in four years. U.S. crude surged more than 4 percent only to settle near where it began. Ten-year Treasury yields touched a five-week low before reversing in the final hour of the Thursday session, while the dollar retreated.

Investors remained cautious before Friday’s nonfarm payrolls report, which is expected to show the U.S. economy added 200,000 jobs last month. The data will factor into the Federal Reserve’s next rate decision, due Oct. 28, as the central bank also weighs whether recent financial-market turmoil, cited as a reason for standing pat on rates last month, has abated enough to warrant tightening. Last quarter’s selloff targeted risk assets from emerging markets to oil, while havens such as the yen strengthened.

“After this big rally we had yesterday, I think people want to sit and see what happens,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “We’ve got the employment number tomorrow. The bottoms following those bad Septembers usually come in October. People are going to sit on the sidelines a little bit longer until they get some more clarification.”

Global equities have been trying to rebound from their steepest quarterly rout since September 2011, sparked by concern a slowdown in China could hamper global growth at the same time as the Fed moves toward its first rate increase since 2006. Commodities got an early boost after Chinese data showed some stabilization in manufacturing, while a reading on American output raised concern about the strength of factories there.

Stocks are struggling to recover from Q3 battering
Stocks are struggling to recover from Q3 battering

Stocks

The S&P 500 added 0.2 percent to 1,923.82 by 4 p.m. in New York after rallying 1.9 percent on Wednesday. That benchmark’s bounce-back began Tuesday after the index slid withing five points of its Aug. 25 low. The three days of gains are the most since Aug. 28.

Thursday’s advance doesn’t necessarily signal the all-clear. Almost 35 percent of the gauge’s members have slipped back below their price from that nadir. The heavyweights are doing all the lifting: Apple Inc., Microsoft Corp. and Exxon Mobil Corp. -- the three largest companies by market cap -- account for nearly one-fifth of the gains since the market bottomed.

“We need to see fewer companies hit new lows, and more companies hit new highs,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $110 billion. “Once that starts happening, we can feel confident that the new lows are in place. Without it, it looks suspect.”

The Stoxx Europe 600 sank 0.4 percent, erasing an earlier gain of 1.5 percent. The gauge rallied 2.5 percent Wednesday to trim its biggest quarterly drop since 2011. Glencore Plc fell 0.6 percent after earlier jumping as much as 8.2 percent, erasing Monday’s 29 percent plunge. Japan’s Topix index surged 2.2 percent, helping the MSCI Asia Pacific Index to a 1.6 percent increase.

The MSCI All-Country World Index added 0.4 percent, clinging to a second day of gains after completing its worst quarter in four years.

Currencies

The dollar weakened following gains last month and the previous quarter as investors prepared for Friday’s employment report. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent. The index gained 0.6 percent in September and 2.8 percent during the third quarter.

“It looks like the market is just waiting to get a bad number that will confirm the Fed’s dovishness,” Steven Englander, global head of Group-of-10 foreign exchange strategy at Citigroup, said by phone. “If it’s a strong number, you break even in dollar terms, and, if it’s a weak number, the dollar will sell off.”

The yen was little changed at 119.93 per dollar, erasing earlier losses after Bloomberg reported that Bank of Japan officials see little need for adding to its unprecedented monetary stimulus. The Australian dollar rose 0.2 percent in a second day of gains and oil’s intraday surge bolstered the Norwegian krone, which jumped 1.1 percent.

Bonds

Ten-year Treasury yields closed at 2.04 percent after sliding 13 basis points over the previous three days. Rates reached a five-week low earlier on Thursday amid doubts the Fed will boost borrowing costs this year. Odds of a rate increase in October remain around 16 percent, according to Fed funds futures, which the chance of a hike in December is at 44.6 percent.

“The probability that you see in December is not 100 percent, but rationally that reflects the fact that we have a few months to go and the payrolls could break either way,” Francesco Garzarelli, co-head of macro markets and market research at Goldman Sachs Group Inc., said in an interview on Bloomberg Radio.

Commodities

The Bloomberg Commodity Index sank 0.8 percent, erasing a prior gain after two days of advances. Natural gas, nickel and lean hogs led declines.

West Texas Intermediate crude futures settled down 0.8 percent at $44.74 a barrel, erasing its earlier surge. WTI’s average price last quarter was the least since the first three months of 2009, as U.S. crude inventories expanded and Iraq, OPEC’s second-largest producer, increased output.

Gold fell for a fifth day, its longest run of losses since July, losing 0.1 percent to settle at $1,113.50 an ounce as investors await the jobs report for clues on to Fed’s policy plans. Higher borrowing costs curb the appeal of bullion, which doesn’t pay interest or give returns like other assets such as bonds and equities.

Copper futures for December delivery dropped 1.6 percent to settle at $2.3045 a pound in New York.

Emerging Markets

The MSCI Emerging Markets Index rose for a second day, advancing 0.7 percent, following the Chinese manufacturing data and as higher commodity prices lifted materials producers. While markets in Shanghai and Hong Kong were shut for National Day celebrations, assets in nations that count China among their biggest trading partners rallied.

The gauge for emerging-market stocks lost 19 percent of its value in the third quarter, the worst rout for the period since 2011, with investors pulling $40 billion out of developing economies.

Brazil’s real, the worst performer among major and developing-nation currencies last quarter, resumed declines Thursday, slipping 1.6 percent after lawmakers approved amendments to a retirement bill that would boost government spending. The real has been sliding amid concern over the country’s finances as it heads into its longest recession since the 1930s.

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