U.S. Shares Sink Most in 6 Weeks Amid Renewed Demand for Havens

Yen Strongest Since October 2014
  • Benchmark Treasury yields slip to lowest point since February
  • Industrial metals slide on concern over China, weak market

U.S. stocks tumbled the most in six weeks as renewed concern central bank policies have failed to revitalize growth spurred a rally in gold and saw the yen climb to a fresh 17-month high.

Financial companies led the Standard & Poor’s 500 Index down 1.2 percent, while the Dow Jones Industrial Average dropped as much as 232 points, with Goldman Sachs Group Inc. sinking the most in almost two months. Yields on 10-year Treasury notes fell to the lowest level since Feb. 11, as investors flocked to haven assets. Gold rose after the Federal Reserve’s meeting minutes out Wednesday reaffirmed the U.S. isn’t rushing to raise interest rates. The yen capped its longest run of gains versus the dollar since the start of the year.

An element of anxiety has returned to financial markets this week, with the Fed minutes emphasizing officials’ concerns over the global outlook and International Monetary Fund chief Christine Lagarde signaling Thursday the organization is likely to lower its outlook for world growth. Stimulus efforts from central banks from Asia to Europe have thus far failed to spark a sustained recovery in prices for risk assets and renewed volatility in oil, amid angst over a glut in the commodity, is unnerving investors. Russia meets with OPEC members on April 17 to discuss a bid to freeze output and steady prices.

“There’s a bit of a risk-off trade going on,” Don Ellenberger, senior portfolio manager at Federated Investors, said by phone. “There’s so much negative sentiment in the market right now, you can see it when you look at the money that’s poured out of equity funds. It’s hard to define a clear trend right now without a whole lot going on but if you look around the market, earnings is something everyone’s focused on.”

Stocks

The S&P 500 fell to 2,041.91 as of 4 p.m. in New York, in its steepest one-day retreat since Feb. 23. The U.S. benchmark has traded in a 35-point range since the Fed’s March 16 meeting, as sentiment lurches from optimism that central-bank policies will buttress global growth to concern their efforts may not be potent enough to fend off a slowdown.

With Alcoa Inc. unofficially kicking off the earnings season on April 11, investors are shifting their attention to corporate results. Analysts estimate S&P 500 profits shrank by 9.8 percent in the first quarter, the sharpest drop since 2009, projections compiled by Bloomberg show. It would also be the fourth consecutive quarter earnings have slumped.

Goldman Sachs and JPMorgan Chase & Co. dropped at least 2.5 percent to lead losses in the Dow Average Thursday. Lenders sold off for the third time in four sessions, as tumbling bond yields stoked speculation that low U.S. borrowing costs will weigh on banks’ profits. Verizon Communications Inc. lost 2.8 percent, the steepest decline since August, amid a report that it plans to make a first-round bid for Yahoo Inc.’s web business next week. Jefferies LLC also downgraded the shares to hold from buy.

The Stoxx Europe 600 Index dropped 0.8 percent to its lowest level since Feb. 25. Italian lenders led declines, while drugmakers advanced to the highest point in almost a month. AstraZeneca Plc posted its biggest two-day surge since November, and Shire Plc reached its highest price since January.

The MSCI Emerging Markets Index was little changed following a two-day drop as traders weighed the Fed’s bearish outlook for the global economy with their plans to take a gradual approach to boosting U.S. rates. Brazil’s Ibovespa rose 0.9 percent amid speculation there’s increasing support to impeach President Dilma Rousseff.

In Asia, index futures from Japan to Australia foreshadowed losses for Friday, with Nikkei 225 Stock Average futures down 2.2 percent in Osaka amid the yen’s five-day advance. MSCI’s Asia Pacific Index added 1 percent Thursday, with health-care stocks leading the climb.

Currencies

The yen strengthened past 108 per dollar, reaching its strongest level in almost 1 1/2 years as the Bank of Japan’s apparent reluctance to intervene in currency markets kept investors buying. The yen appreciated at least 0.8 percent against its 16 major peers, climbing 1.4 percent to 108.21 per dollar.

The euro weakened 0.2 percent against the greenback after executive board member Peter Praet said the European Central Bank can boost the scale of its support to the euro-area economy further in the event that fresh risks to the region’s outlook arise.

The pound fell a third day to its lowest level in more than a month after analysts said Dutch voters rejecting a European Union trade agreement with Ukraine could embolden Britons campaigning to leave the single market. Polls show the June 23 British referendum will be close, causing traders to brace for more volatility amid concern a so-called Brexit would damage the economy.

Bonds

Treasuries gained, pushing yields on 10-year notes down seven basis points to 1.69 percent. Jamie Dimon, chief executive officer of JPMorgan Chase & Co., said in an annual letter to shareholders that he’s concerned demand for U.S. debt will decline and the Fed will raise rates faster than people expect.

Valeant Pharmaceuticals International Inc. won the support of its lenders to waive a default and ease some restrictions on its loan pact as the drugmaker seeks to rein in its $32 billion debt load.

Spain’s 10-year government bond yields climbed a sixth day as investors bought 3.37 billion euros of conventional securities in an auction. Rates on similar-maturity German bunds dropped three basis points, or 0.03 percentage point, to 0.09 percent.

Commodities

West Texas Intermediate crude futures fell 1.3 percent to settle at $37.26 a barrel in New York, following the last session’s 5.2 percent jump, its steepest one-day gain since March 16. The meeting between major oil producers is set to take place in Doha to discuss freezing oil production in a bid to stabilize the markets.

Gold posted its biggest advance in three weeks after the Fed minutes made the precious metal look more competitive against interest-bearing assets. Bullion for June delivery climbed 1.5 percent to $1,241.90 an ounce following Wednesday’s retreat.

Copper slumped the most in three months, wiping out its gains for 2016, as miners and investors gathering at an industry conference in Chile expressed concern over demand for the metal. The London Metal Exchange’s LMEX Metal Index slid 2.1 percent, the most in a month, as nickel to zinc also lost at least 2 percent.

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