- Treasuries to yen advance with U.S. crude below $31 a barrel
- Energy producers drive S&P 500 losses with consumer shares
U.S. stocks fell, snapping a three-day rally as the highest American oil inventories in 86 years sent crude below $31 a barrel, fueling demand for haven assets from Treasuries to gold.
Energy producers posted the biggest declines in the Standard & Poor’s 500 Index, with investors betting on defensive equities less tied to economic growth, such as utility and telephone stocks. Oil pared a second day of gains to close at $30.77 a barrel after the U.S. data, while gold jumped more than 2 percent. Yields on 10-year Treasury notes fell to as low as 1.75 percent, halting a three-day advance. Despite the U.S. losses, emerging market stocks rose for a fourth straight day, to their highest level since Jan. 6.
While turbulence in financial markets has eased somewhat this week, investors are still alert for news on the global glut in crude and whether China’s slowdown will accelerate. Almost half of the S&P 500’s losses this year were erased in the three trading days through Wednesday, as the Federal Reserve acknowledged it is weighing market volatility when it considers the pace of interest-rate hikes. That’s also caused lockstep moves from the recent rout to wane. Correlations between the S&P 500 and 10 asset classes including oil and other stock benchmarks have retreated, data compiled by Bloomberg show.
“I would expect a little pullback after three straight days of gains, especially since growth has done particularly well, it may give people some pause and some profit taking,” said Mariann Montagne, who helps oversee $870 million as senior investment analyst at Gradient Investments Group. “In general, a market driven by oil will last a few months.”
The S&P 500 fell 0.5 percent to 1,917.83 as of 4 p.m. in New York. The benchmark gauge rose 1.7 percent on Wednesday, capping its first three-day advance this year. Some 19 S&P 500 members post earnings Thursday.
Consumer-staple companies retreated 0.4 percent with Wal-Mart Stores Inc. sliding 3 percent after cutting its annual sales forecast. Health-care companies extended losses in afternoon trading as Perrigo Co. posted disappointing earnings and biotechnology companies slumped.
Investors are also scrutinizing U.S. economic data for signs of slower growth. The number of Americans filing for unemployment benefits unexpectedly declined last week to a three-month low, Labor Department data showed Thursday. A measure of business sentiment contracted in February less than estimated, according to a separate report.
The Stoxx Europe 600 Index closed little changed, after earlier rallying as much as 1 percent.
Food companies, lenders and raw-material producers weighed heaviest on Europe’s benchmark. Nestle SA lost 3.7 percent after posting its smallest annual sales gain in six years. Anglo American Plc dropped 7.7 percent after seeing its credit rating cut to junk for the third time this week.
The MSCI Asia Pacific Index rallied 2.3 percent as Japanese stocks resumed gains, with the Topix index rallying back to its highest level since Feb. 8 following a 1.1 percent drop on Wednesday.
MSCI’s gauge of developing-nation shares advanced 1.4 percent as benchmark equities gauges in Saudi Arabia, Russia and South Korea rose more than 1 percent.
The Hang Seng China Enterprises Index jumped 3 percent while the Shanghai Composite Index fell 0.2 percent after data showed China’s consumer-price inflation picked up in January. The numbers raising the prospect that a sustained acceleration would offer policy makers some relief as they battle to bolster growth.
China’s yuan traded onshore appreciated 0.2 percent to 6.5170 per dollar as the People’s Bank of China said it will move to daily open-market operations, vowing to improve efficiency by increasing frequency. Separately, the PBOC was said to offer to reduce the medium-term borrowing cost it charges lenders in the second such move this year.
Yields on Saudi Electricity bonds due in April 2024 climbed three basis points, or 0.03 percentage point, to 4.24 percent. Saudi Arabia’s credit rating was knocked down two steps to A- by S&P, which said the decline in oil prices will have “a marked and lasting impact” on the crude-dependent economy.
Rates on Treasury notes due in a decade fell eight basis points to 1.74 percent in New York.
Yields on Spain’s 10-year bonds fell four basis points to 1.69 percent, and Italy’s dropped five basis points to 1.55 percent. Meanwhile, rates on German bunds declined five basis point to 0.22 percent.
In Japan, five-year bonds with a negative yield were sold at auction for the first time.
West Texas Intermediate crude closed up 0.4 percent, after earlier rallying as much as 4.3 percent to $31.98 a barrel. Crude stockpiles rose by 2.15 million barrels to 504.1 million last week, according to the U.S. Energy Information Administration. Imports climbed 11 percent, the biggest increase since April.
Prices climbed earlier as Iran cautiously supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels.
Gold in the spot market extended gains throughout trading today, jumping 2.1 percent to $1,233.94 an ounce in the spot market.
The yen strengthened versus all of its 16 major peers, gaining 0.8 percent to 113.18 per dollar, while the euro fell a fifth day, down 0.2 percent to $1.1102.
A gauge of the British pound’s volatility against the euro jumped to the highest level since the currency bloc’s debt crisis as Prime Minister David Cameron sought to seal a deal on the terms of Britain’s membership of the European Union. Six-month implied volatility for the pound versus the euro, a measure of anticipated price swings based on options, climbed to 11.90 percent, the highest since October 2011, based on closing prices.
Currencies of commodity-dependent nations retreated, with the Brazilian real, Norwegian krone, Canadian dollar and the Australian dollar all falling at least 0.4 percent.