- Apple rally not enough to overshadow energy share slump
- Japan index futures drop with China, Korea shut Thursday
U.S. stocks erased gains as a slump in oil sank energy shares, overshadowing a rally in Apple Inc. amid concern the rout that’s wiped out $2 trillion in global equity value the past week isn’t over. Treasuries advanced, while the dollar retreated.
The S&P 500 Index turned lower in afternoon trading Wednesday as selling spread from oil and gas producers to the broader market, even as Apple climbed to a five-month high. U.S. crude slid to a two-week low while copper jumped. Treasury yields retreated with rates on most European sovereign debt after surging on concern central banks are turning less accommodative.
Volatility roared back into financial markets over the past week as the Federal Reserve weighed the case for an interest-rate increase, European Central Bank chief Mario Draghi refrained from adding to stimulus and the Bank of Japan continued to review the costs and benefits of its own policies. Markets are losing confidence in the ability of policy makers to boost inflation and there is a limit to how much quantitative easing programs can accomplish, Harvard University Professor of Economics Kenneth Rogoff said Tuesday.
“The market moves the last couple of days were so extreme you’d actually want to see something a little more normal,” said Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, which has about $3 billion under management. “People are trying to get ready for next week when the Fed comes out. Volumes are up and people are positioning themselves for the Fed, the election and whatever other headaches are going on.”
The S&P 500 fell 0.1 percent to 2,125.77 as of 4 p.m. in New York, erasing an advance of as much as 0.7 percent during the session. Energy companies were the worst performers, falling for a second day as crude fell on concern a drop in U.S. stockpiles will prove temporary. Apple jumped 3.5 percent amid positive sentiment around the latest version of its iPhone.
The S&P 500 has dropped almost 3 percent from a record set on Aug. 15. Nearly all of the decline has come in the past week, led by raw-materials producers, consumer-staples companies and phone stocks. The measure has pared its gain this year to 4 percent after rising as much as 7.2 percent.
The Stoxx Europe 600 Index slipped 0.1 percent, retreating for a fifth straight day. Bayer AG jumped 2.4 percent after agreeing to buy Monsanto Co. in a deal valued at $66 billion, winding up four months of talks to create the world’s biggest supplier of seeds and pesticides.
Developing-nation stocks extended their longest selloff since June, with the MSCI Emerging Markets Index down 0.1 percent, paring its 2016 gain to 12 percent. The Shanghai Composite Index dropped 0.7 percent and has shed 2.5 percent this week, the most since May.
Asian index futures signaled a mixed picture for Thursday, with markets in South Korea and mainland China closed for the rest of the week. Nikkei 225 Stock Average contracts were down 1 percent on the Chicago Mercantile Exchange, while futures on Australia’s benchmark slipped 0.4 percent. Futures on Hong Kong’s Hang Seng Index rose by 0.1 percent.
Yields on 10-year Treasuries fell three basis points, or 0.03 percentage point, to 1.70 percent, following a six basis point gain on Tuesday. Rates on similar-maturity German notes declined five basis points to 0.02 percent as sovereign debt in France, Italy and Spain advanced.
The yield on the Bloomberg Barclays Global Aggregate Index climbed to 1.24 percent Tuesday, the highest level since June 23, as Mohamed El-Erian, chief economic adviser at Allianz SE and a Bloomberg View columnist, urged the Fed to get its next rate hike over and done with. The timing would be unlikely to alter a “shallow cycle” of increases, he said.
Japan’s yield curve steepened amid speculation the BOJ will concentrate its bond-buying program more heavily on short-term securities. Five-year yields decreased two basis points to minus 0.20 percent, while the 30-year rate jumped six basis points to 0.57 percent.
The Bloomberg Commodity Index fell 0.4 percent after dropping 1.3 percent on Tuesday. Gold reversed earlier losses to trade 0.3 percent higher, its first advance in six days.
West Texas Intermediate crude fell 2.9 percent to $43.58 a barrel in New York. That followed a 3 percent tumble in the previous session and left prices at their lowest level since Sept. 1.
Data on U.S. government stockpiles Wednesday showed a surprise drop in inventories, though data for distillates and other products raised concern that demand is weakening. Money managers have been slashing bets on falling oil prices at the fastest pace in five months before major producers meet this month in Algiers to discuss output constraints.
Copper posted its biggest gain in almost three months, jumping 2.6 percent in London as strong economic data out of China fueled speculation that demand from the world’s largest metals consumer will increase. An index of global mining stocks advanced for the first time in six days. Aluminum, zinc, lead and tin also rose, while nickel dropped.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 peers, dropped 0.1 percent following a 0.7 percent surge on Tuesday. The U.S. currency weakened 0.1 percent to 102.43 yen and slipped 0.2 percent to $1.1250 per euro.
Goldman Sachs Group Inc. is holding fast to its bullish dollar call. The bank expects the U.S. currency to strengthen by 15 percent based on forecast for a three-percentage-point rate increase during a Fed tightening cycle that will continue through 2019, strategists led by Robin Brooks in New York said in a note published Tuesday.
Brazil’s real and Malaysia’s ringgit declined as oil -- a key export for both nations -- extended its slump. Mexico’s peso slipped 0.2 percent, erasing gains of about 0.4 percent, after a poll showed Donald Trump is leading Hillary Clinton by five points in Ohio, a state that has backed the winning presidential candidate in every election since 1964.