U.S. Stocks Slip to 3-Week Low, Oil Gains Before Jobs Report

Brian Belski: Bull Market Is Still Very Much Alive
  • S&P 500 turns negative, extends lowest level since April 11
  • Oil pares advance to just above $44 a barrel in New York

A rally in crude oil faded and U.S. stocks slipped for a third day, leaving the S&P 500 Index at a three-week low as investors awaited Friday’s jobs report for clues on the strength of the world’s largest economy. Emerging-market shares fell and the dollar strengthened.

The S&P 500 has fallen 2.5 percent since April 20 amid rising concern global economies haven’t responded to central-bank stimulus. Emerging-market shares dropped to the lowest in seven weeks, and Turkish 10-year bond yields topped 9.5 percent as the prime minister said he was stepping down. Crude advanced as wildfires disrupted production in Canada. Treasuries rose a fourth day, with economists lowering predictions for how high the central bank will be able to lift interest rates.

Global equities continued their slow slide from recent highs, with a 10-week rally faltering as investors gauge prospects for higher U.S. interest rates amid persistent signs of tepid to slowing growth in major economies. While Fed officials signaled in recent days that rates could rise as soon as June, futures traders assign only a 10 percent probability for such a move as recent data indicated the U.S. economy remains sluggish. The dollar’s rebound from the lowest level in a year weighed on commodities.

“Sentiment is more negative than I would’ve thought after such a strong rally off that February low,” said Charlie Bilello, director of research at New York-based Pension Partners LLC. “This is a normal kind of digestive period or consolidation after a strong move and ahead of the jobs report tomorrow.” 

Stocks

The S&P 500 fell less than 0.1 percent at 4 p.m. in New York. A rally that sent the index up as much as 15 percent from February lost steam after reaching a four-month high on April 20, amid lackluster earnings and lukewarm signs of an economic pickup.

Retailers slid after L Brands Inc. posted preliminary first-quarter profit that trailed estimates. Utility and telephone stocks retreated, as investors capitulated from a recent preference for companies less tied to growth. Tesla Motors Inc. slumped after UBS Group AG described the electric-car maker’s new production goals as “too optimistic.”

“There’s still a very cautious feeling to markets,” said William Hobbs, who helps oversee about $150 billion as head of investment strategy at the wealth-management unit of Barclays Plc in London. “The world is growing and is likely to grow a bit quicker as we go through the year and inflation returning and that’s simply not priced in at these levels.”

The Stoxx Europe 600 climbed 0.3 percent, for the first gain in five days. Trading volume was 16 percent lower than the 30-day average amid holidays in markets including Switzerland, Denmark, Sweden and Finland.

Emerging-market stocks sank 0.7 percent, with the MSCI Emerging Market Index dropping for a fifth day in the longest slump since December.

Bonds

U.S. Treasuries due in a decade rose for a fourth day. The benchmark 10-year note yield fell three basis points to 1.74 percent, the lowest level in two weeks. Traders are awaiting further insight into the state of the labor market from the monthly payrolls report on Friday.

Turkish bonds fell, sending 10-year yields to a one-month high, after Prime Minister Ahmet Davutoglu lost a power struggle with President Recep Tayyip Erdogan.

Currencies

Currencies of nations that export all kinds of commodities benefited from a jump in oil prices following news of a drop in U.S. production. Australia’s currency vied with its Canadian counterpart to lead gains. The Bloomberg Commodity Index rose for the first time in four days.

A gauge of the dollar versus 10 major peers extended its advance from its lowest level in a year, capping its biggest three-day rise in six months. The greenback has been supported this week as two regional Fed presidents said that a rate increase should be considered at the central bank’s June gathering.

Commodities

West Texas Intermediate crude climbed for a second day, rising 1.2 percent to settle at $44.74 a barrel. Fires in Canada may affect more than 1 million barrels a day of capacity, according to company statements and data published in Alberta’s Spring Oil Sands Quarterly. Brent crude climbed 3.7 percent to $46.26.

U.S. oil production dropped by 113,000 barrels a day to 8.83 million a day last week, the lowest level since September 2014, data showed Wednesday.

Gold futures fell for a third straight day, the longest slump in five weeks, as the dollar’s strength damped demand for the metal. Bullion for June delivery slipped 0.2 percent to settle at $1,272.30 an ounce in New York.

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