Stocks Tumble on Jobs Report as Treasuries, Gold Rally
Stocks fell after a report showed U.S. employers hired less than half the workers economists forecast in March, damping optimism in the world’s largest economy. Gold and Treasuries rallied and bond yields from France to Austria slid to records.
The Standard & Poor’s 500 Index (SXXP) retreated 0.4 percent to 1,553.28 at 4 p.m. in New York, paring losses that reached 1.3 percent. The Stoxx Europe 600 Index sank 1.6 percent, its biggest drop since October, as travel and leisure companies led declines on concern an outbreak of bird flu in China will hurt demand. The Dollar Index lost 0.2 percent and 10-year Treasury yields fell five basis points to 1.70 percent, the lowest level of 2013. France’s 10-year bond yield dropped to as low as 1.72 percent, the least since Bloomberg began compiling the data in 1990. Gold jumped 1.5 percent.
The S&P 500 capped the biggest weekly drop of the year after the Labor Department said payrolls grew by 88,000 workers last month, the smallest in nine months, following a revised 268,000 gain in February that was higher than first estimated. Retail sales in the euro area fell 0.3 percent in February from the previous month, a report showed today, after European Central Bank President Mario Draghi said yesterday officials “stand ready to act” to bolster the flagging economy.
“This report is a huge disappointment,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $55 billion, said in a telephone interview. “This will spook the market and it obviously means that the Fed will remain on vigil with regards to the highly accommodative monetary policy.”
Cisco Systems Inc., American Express Co. and Hewlett- Packard Co. dropped more than 1.4 percent to lead losses in the Dow Jones Industrial Average (INDU), which pared losses after sinking as much as 172 points. Seven of the 10 of the main industries in the S&P 500 declined, led by technology, consumer and financial shares. The benchmark index fell 1 percent for the week.
The median forecast of 87 economists surveyed by Bloomberg projected an advance of 190,000 in payrolls. The jobless rate fell to 7.6 percent from 7.7 percent amid a slump in the size of the labor force.
“We’re in a very difficult economic environment,” Eric Zoldan, a New York-based investment analyst with JHS Capital Advisors LLC, said in a phone interview. His firm manages $3.3 billion. “There’s going to be a lot of pressure on the market. The most important thing is that the number of working adults is falling because they’re dropping out of the labor force and they are dropping out at a precipitous rate.”
F5 Networks Inc. lost 19 percent for the biggest drop in the S&P 500 (SPXL1) and the stock’s biggest decline since January 2011. The maker of equipment for managing data traffic reported preliminary quarterly profit and revenue that missed its forecast as North American sales slowed.
Canadian stocks also slumped after disappointing employment data, sending the benchmark S&P/TSX Composite Index (SPTSX) down 0.3 percent for a fifth straight loss, its longest slump since September. The drop of 54,500 positions reported today by Statistics Canada offset a 50,700 gain in February, and lifted the unemployment rate to 7.2 percent from 7 percent. The merchandise trade deficit for February was the 11th in a row, marking the longest streak in records dating to 1988.
Alcoa Inc. (AA) is due to unofficially kick off the first- quarter earnings-reporting season in the U.S. on April 8.
Earnings at S&P 500 companies decreased 1.8 percent in the first three months of the year, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease in profit since 2009. Energy company earnings fell the most with a drop of 6.3 percent, the estimates show, as oil traded at an average of $94.36 a barrel during the period compared with $103.03 in the first quarter of 2012. Profit at technology companies declined 4.1 percent for the second-biggest drop, the projections show.
The Stoxx 600 extended this week’s retreat to 2.3 percent, its worst since November. Deutsche Lufthansa AG, Air France-KLM Group and International Consolidated Airlines Group SA fell more than 5 percent as the death toll from a new strain of bird flu in China, known as H7N9, rose to six people
The MSCI Emerging Markets Index (MXEF) slid 0.8 percent for a fifth straight decline and the MSCI BRIC Index extended its drop from this year’s peak to 9.8 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 3.1 percent, the most since July. South Korea’s Kospi sank 1.6 percent, capping the worst week since May, and the won slid to a seven-month low as the risk of conflict with North Korea spurred capital outflows.
Austria’s 10-year yields fell 10 basis points to 1.48 percent, while Belgium’s dropped 11 basis points to 1.96 percent.
Lean hogs, oil and cotton lost at least 1.7 percent to lead the S&P GSCI Index of 24 commodities to its sixth straight decline, the longest slump since May 2012.
Gold for immediate delivery snapped a three-day decline in London as the U.S. jobs report spurred speculation the Federal Reserve will be in no rush to exit its stimulus programs.
The yen weakened against all of its 16 major peers, losing 1.2 percent to trade at an almost four-year low of 97.54 per dollar.
The move by the Bank of Japan this week to embark on record easing means the world’s four biggest developed-market monetary authorities -- the BOJ, the Fed, the European Central Bank and the Bank of England -- are aligned in their commitments to spur growth and return their economies to full strength. The Fed, the ECB and the BOJ have more than doubled the combined size of their balance sheets since the global financial crisis broke out in 2007, expanding them by a total $4.7 trillion. With the BOJ’s action, that amount could be increased by at least a further $1.3 trillion by the end of 2014.
Increased stimulus from central banks may bolster a global economy forecast by the World Bank in January to expand 2.4 percent this year, down from a previous projection of 3 percent. At the same time, the level of intervention carries the threat of inflation and asset bubbles as well as tension with emerging markets including China, Brazil and South Korea over exchange rates and capital inflows.
“This is unprecedented on many levels,” said Pippa Malmgren, president and founder of Principalis Asset Management LLP in London and a former financial-market adviser to President George W. Bush. “Not only do you have the most in terms of size of economy or number of central banks, but the effort is a record effort. We’ve never seen such unconventional methods used to create as much inflation as possible.”
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