- Commodity share gains offset health, tech losses in U.S.
- Prospect of Brazilian president's impeachment boosts real
Energy producers helped U.S. stocks to a third day of gains, erasing earlier losses as investors examined economic data ahead of a crucial employment report on Friday. Brazilian stocks entered a bull market, surging with the real.
Declines in health-care and technology stocks were outweighed by a rebound in energy and raw-material shares in the Standard & Poor’s 500 Index. Earlier, the gauge fell as much as 0.5 percent as data showed jobless claims increased, while growth in U.S. service industries slowed. Brazil’s real strengthened, and the Ibovespa capped for its best day since October 2009, amid heightened speculation that a push to oust President Dilma Rousseff is gaining momentum. U.S. crude oil settled near an eight-week high.
Global equities have recouped more than half this year’s losses since sinking to a 2 1/2-year low on Feb. 11 as improving U.S. economic data and optimism China will do more to tackle slowing growth burnishes sentiment. Friday’s report on nonfarm payrolls will give investors further insight into the health of the American economy and the trajectory of the Federal Reserve’s approach to further interest rate hikes. The U.S. central bank meets on March 16, while its European counterpart convenes March 10.
“Investors are clearing the decks ahead of tomorrow’s jobs report,” said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which has about $42.5 billion. “Anything that moves in the direction of the Fed’s game plan of four rate hikes this year will be a real market-mover. A big gain in tomorrow’s jobs report would definitely put a near-term hike back on the table.”
The S&P 500 added 0.4 percent to 1,993.40 as of 4 p.m. in New York, while the Dow Jones Industrial Average gained 0.3 percent.
JPMorgan Chase & Co. lowered its recommendation on global equities in asset allocation portfolios to underweight, citing recession risk and the “near-empty ammo box of policy makers.” Economic models show a one-in-three chance the U.S. expansion will halt in the next year, two-out-of-three odds for within two years, and close to 100 percent for within three years, the firm’s Jan Loeys wrote in a note. Should a recession hit this year, the S&P 500 could fall as much as 35 percent from its 2015 record to around 1,400.
Meanwhile, Bridgewater Associates’ Ray Dalio said investors should expect low returns and volatile financial markets, but not another financial crisis like the one in 2008. “I’m not bearish on stocks,” Dalio, the founder of Bridgewater Associates, said on Bloomberg TV from Austin.
Data Thursday showed the number of Americans applying for jobless benefits unexpectedly climbed last week. Other reports showed the Institute for Supply Management’s employment measure dipped below the expansion threshold for the first time since February 2014, while factory orders rose less than expected. Data due Friday is estimated to show payrolls increased by 195,000 in February.
“Investors are clearing the decks ahead of tomorrow’s jobs report,” said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which oversees about $42.5 billion. “It’s encouraging that the market has been holding onto gains and consolidating, so modest declines don’t bother me. People have been dismissing inflation as a non-event in 2016, and the evidence suggests it’s moving higher this year. That means the jobs report is going to carry that much more weight.”
Herbalife Ltd. tumbled 7 percent after saying that it overstated the growth of its customer and distributor base.
European stocks halted their longest winning streak since October, with the Stoxx Europe 600 Index down 0.5 percent, falling for the first time in six days.
The MSCI Asia Pacific Index capped its biggest three-day rally since December 2011 as shares from Japan to Australia extended gains. The Shanghai Composite Index added 0.4 percent, posting its third consecutive daily climb on continued optimism policy makers will unveil more measures to boost growth at this week’s legislative meetings.
Yields on 10-year Treasuries fell one basis point, or 0.01 percentage point, to 1.83 percent, while a bond-market measure of inflation expectations climbed for a 10th day, the longest rising streak since March 2012.
Rates on 10-year German bunds dropped four basis points to 0.17 percent, having climbed 10 basis points in the previous two days. Yields on Spanish bonds due in a decade fell three basis points to 1.53 percent, while that on Italian debt dropped four basis points to 1.42 percent.
The MSCI Emerging Markets Index gained 1.4 percent, rising to its highest level since New Year’s day. Indian shares posted the biggest three-day increase since September 2013 as metal producers climbed after a top official said the government may consider a bailout package for indebted companies in the industry.
The real and Argentina’s peso strengthened the most versus the dollar among 24 emerging market currencies. The Ibovespa jumped 5.1 percent in a fourth day of gains after a magazine said that a former government leader in the Senate, who was arrested in November, allegedly revealed Rousseff’s involvement in a corruption scandal.
West Texas Intermediate crude fell 0.3 percent to close at $34.57 a barrel, after earlier declining as much as 1.4 percent. Oil has rallied every other day this week as data showing a jump in U.S. crude inventories was countered by a decline in the nation’s production.
“The crude inventory rise, albeit very strong, is in line with seasonal behavior,” said Ole Hansen, an analyst at Saxo Bank A/S in Copenhagen. “What is non-seasonal is the slowing production. An increased number of traders are wondering whether the low has been found” for crude prices.
Industrial metals gained, with copper advancing 1.4 percent to $4,855 a metric ton. Nickel rose 3.2 percent and zinc added 1.5 percent as investors anticipated the annual China policy conference might signal that further stimulus is likely.
Gold in the spot market rose to a one-month high, rising 1.9 percent to $1,263.32 an ounce. The metal is up 19 percent this year as market volatility boosted demand for haven assets.
The Bloomberg Dollar Spot Index declined 0.5 percent in a fourth day of declines, as the greenback weakened against 13 of 16 major counterparts. The U.S. currency slipped 0.9 percent to $1.0961 per euro, while it was little changed at 113.63 yen.
The Bloomberg JPMorgan Asia Dollar Index advanced for a fourth day, its longest rising streak since October. The South Korean won and the Malaysian ringgit strengthened at least 0.7 percent.