U.S. Stocks Fall on Commodities Selloff

Turmoil in the Mining Industry: Anglo Scraps Dividend
  • Tech stocks drive S&P 500 to lowest close since Nov. 13
  • Oil rally evaporates as U.S. crude nears $37 a barrel

U.S. stocks sank to their lowest level almost in four weeks amid a rout in technology shares and as the selloff in oil resumed amid concern that slowing global growth will exacerbate supply gluts in commodities.

Tech companies, the market’s best-performing sector over the past two months, bore the brunt of Wednesday’s decline, which pushed the Standard & Poor’s 500 Index to its lowest closing level since Nov. 13. U.S. crude erased earlier gains, extending losses at a six-year low. The Bloomberg Dollar Spot Index sank as investors started counting down to next week’s Federal Reserve meeting. New Zealand’s currency rallied after the central bank cut interest rates, but said it expects to achieve its inflation goal at current rate levels.

“The market in general seems to be following commodities, specifically oil, and when it rolled back over into negative territory the market seemed to follow,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates in South Carolina. “Everybody’s waiting on the Fed meeting next week, and you have the overhang of various geopolitical issues that are out there.”

This week’s slump in commodities has clouded prospects for recoveries in the U.S. and Europe as capital spending from oil producers and miners wanes at the same time as China’s economy shows few signs of firming. The materials slide has also kept inflation below central-bank targets one week before the Fed is expected to boost borrowing costs for the first time in a decade. This has fueled expectations for divergence in monetary policy globally with officials from Europe to Japan still favoring economic stimulus.

Stocks

The S&P 500 fell 0.8 percent to 2,047.62 as of 4 p.m. in New York, erasing an earlier advance of 0.8 percent. The gauge plunged through its average price for the past 50 days for the first time in two months, while a Goldman Sachs Group Inc. index of stocks with the highest short interest tumbled for a sixth day.

The technology-heavy Nasdaq 100 Index retreated 1.6 percent, as Apple Inc. slid 2.2 percent. Costco Wholesale Corp. sank 5.4 percent, the most in three years, after the largest warehouse-club chain in the U.S. reported below-estimate earnings.

DuPont Co. jumped 12 percent with Dow Chemical Co. as people familiar with the matter said a deal for the two companies to merge could be announced as soon as this week. Raw-materials producers, a group that includes the two chemical stocks, rallied 3.1 percent for the best performance in the S&P 500.

The Stoxx Europe 600 Index lost 0.4 percent after earlier touching its lowest point since Oct. 22. Bayer AG slid 1.8 percent, among the biggest drags on the gauge, after a report that Europe’s drug safety agency is investigating one of its products. Banks also fell.

In Asia, Japanese shares led the MSCI Asia Pacific Index down 0.2 percent Wednesday, while Australia’s S&P/ASX 200 Index sank to its lowest level since Nov. 16.

Commodities

West Texas Intermediate crude fell another 0.9 percent to $37.16 a barrel in New York as investors discounted a decline in U.S. oil inventories. Supplies fell by 3.57 million barrels last week, the Energy Information Administration reported Wednesday. Stockpiles along the Gulf Coast tumbled 7.3 million barrels, the biggest drop since December 2012.

“The decline was due to end-of-the-year inventory management,” said Edward Morse, Citigroup Inc.’s global head of commodities research in New York. “The market is in for more downward pressure.”

Oil is still trading near levels last seen during the global financial crisis as Saudi Arabia leads the Organization of Petroleum Exporting Countries in maintaining output and defending market share against higher-cost producers, fueling a record supply glut. 

Gold futures fluctuated near $1,076.50 an ounce, while contracts on copper advanced 0.5 percent on the Comex.

Currencies

The U.S. currency weakened against most of its major peers, with the Bloomberg Dollar Spot Index declining 0.8 percent to snap a three-day advance. Norway’s krone rebounded its from its lowest level in more than 13 years, while South Africa’s rand and the Colombian peso climbed from record lows.

The dollar remains near a more than decade high before the Fed meets next week to discuss raising rates for the first time since 2006. At the same time, the European Central Bank has reduced its deposit rate further into negative territory, widening the gap between the two central banks’ monetary policies. 

The euro strengthened 1.2 percent to $1.1022, extending gains since the ECB fell short of market expectations for monetary stimulus on Dec. 3.

The kiwi climbed as much as 1.7 percent toward the end of Wednesday trading, and gained more than a percent against neighboring Australia’s dollar. While the Reserve Bank of New Zealand reduced key rates back to a record-low 2.5 percent, Governor Graeme Wheeler said he expects to push average inflation into the middle of the bank’s target range at the “current interest-rate settings.” The RBNZ will, however, “reduce rates if circumstances warrant,” he added.

“The RBNZ cut interest rates but basically signaled that they’re done for the moment,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. The central bank outlined “both upside and downside scenarios to the outlook for the economy; basically the whole message has been a little bit more balanced,” he said.

Emerging Markets

Emerging-market stocks fell for a sixth day, their longest slump since August, as data showed China’s producer prices extended declines. The MSCI Emerging Markets Index slipped 0.3 percent to their lowest level since the end of September. The Ibovespa rallied the most in five weeks and the real strengthened on speculation support to oust Brazil’s president is growing.

China’s factory-gate prices dropped for a record 45th straight month, reflecting weaker demand for industrial goods and commodities. The producer-price index fell 5.9 percent in November from a year earlier, the National Bureau of Statistics said Wednesday, versus a projected 6 percent drop.

The yuan weakened as China’s central bank cut its reference rate for the currency to the lowest level since 2011. Policy makers reduced the yuan’s so-called fixing, which limits the onshore currency’s moves to 2 percent either side of the rate, by 0.1 percent to the weakest level since Aug. 10, 2011. The spot rate dropped 0.2 percent to close at 6.4280 per dollar in Shanghai.

Bonds

Ten-year Treasuries were little changed, with yields holding at 2.22 percent. The rate has fallen 10 basis points since Dec. 4, even as the odds for a Fed rate hike at the meeting next week hold around 78 percent.

German bunds retreated, with 10-year yields adding three basis points, or 0.03 percentage point, to 0.60 percent.

New Zealand debt due in a decade climbed early Thursday, with yields falling one basis point to 3.53 percent.

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