Commodities, Stocks Slump as Treasuries Gain on EconomyNikolaj Gammeltoft and Lindsey Rupp
Oil and metals led a gauge of commodities down the most since November and U.S. benchmark stock indexes retreated from records while Treasuries rallied after reports on the American economy trailed estimates. Canadian stocks tumbled the most since June.
The S&P GSCI index of 24 commodities dropped 2 percent as of 4 p.m. in New York and reached its lowest level since December. Oil plunged the most this year after U.S. inventories increased to a 22-year high. Gold sank 1.4 percent to the lowest since June and to the brink of a bear market. The Standard & Poor’s 500 Index slipped 1.1 percent to 1,553.69 and Canada’s benchmark index fell more than 2 percent. Ten-year Treasury yields lost four basis points to a three-month low.
Stocks and commodities extended losses and Treasuries added to gains as the Institute for Supply Management’s gauge of U.S. service industries fell more than economists forecast in March. Earlier data from ADP Research Institute showed American companies added fewer jobs than projected last month.
“The two data points that came in below expectations have spooked the equity markets today,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., said in a phone interview. His firm oversees about $130 billion. “People are focused on Friday’s jobs report and the ADP number made investors more skittish.”
The S&P GSCI gauge slid 2 percent, its biggest plunge since November, amid declines in 15 of the 24 commodities it tracks. Crude dropped the most in more than four months, losing 2.8 percent to $94.45 a barrel, after a government report showed that U.S. oil stockpiles climbed to the highest level in more than 22 years.
Gold futures for June delivery tumbled 1.4 percent to settle at $1,553.50 an ounce in New York, after touching $1,549.70, the lowest since June 28. The metal has declined 7.3 percent in 2013, after rallying the past 12 years. Today’s settlement leaves prices down 18 percent from a record close of $1,891.90 on Aug. 22, 2011, bringing it closer to the threshold of the 20 percent benchmark for a bear market.
Copper dropped 1.3 percent to $3.333 a pound on the Comex in New York, after touching its lowest price since August. Silver sank 1.7 percent to $26.80 an ounce, more than 20 percent below its Oct. 4 settlement on April 1.
Commodities’ supercycle is “probably” over and prices are unlikely to match their performance over the past decade, according to UBS AG. Growth in China is slowing and becoming less commodity-intensive, London-based strategists Stephane Deo and Ramin Nakisa wrote in a report dated yesterday.
UBS cut industrial metals to neutral after a “wrong” recommendation to go long in September and adding to the position at the start of 2013, according to the report. While commodity prices could see some gains in the near future, a recovery would be limited and short-lived, the bank said.
The S&P 500 index closed at a record 1,570.25 yesterday as concern over Europe’s debt crisis eased and factory orders topped forecasts. Losses today were led by financial, energy and consumer companies, with each group dropping at least 1.1 percent. JPMorgan Chase & Co., Bank of America Corp. and Intel Corp. lost more than 1.9 percent for the biggest declines in the Dow Jones Industrial Average.
“It’s a combination of the ISM and ADP data both being below estimates is putting a little bit of cold water on the market’s bullish sentiment,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said by phone. “I can’t say its really a surprise the market is pulling back a little.”
Zynga Inc. rallied 15 percent after saying it will introduce real-money online gambling in the U.K.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, jumped 11 percent to 14.22 today. The gauge, known as the VIX, is down 21 percent for the year.
Companies boosted employment by 158,000 workers in March, less than the 200,000 gain forecast in a Bloomberg survey, ADP Research Institute figures showed two days before the Labor Department’s monthly payrolls report.
The Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers almost 90 percent of the economy, fell to 54.4 in March from 56 in the prior month. The median forecast of 73 economists surveyed by Bloomberg was 55.5. Readings above 50 signal expansion, and estimates ranged from 53.7 to 56.5. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.
Record stock prices mean investors have to look harder to find attractively valued stocks, according to Norman Boersma of Templeton Global Advisors Ltd.
“Certainly in the U.S. it’s become a bit tougher and we’re fairly underweight in U.S. markets,” Boersma, president of Templeton Global Advisors, said in an interview on Bloomberg Radio today. “When you go looking, especially among small- and midcap stocks, there are still some pretty good companies out there trading at reasonable valuations.”
Canadian stocks led losses in the Americas, with the S&P TSX/Composite Index erasing its gain for the year. Energy and raw-material companies, which collectively make up more than 40 percent of the index, contributed most to declines.
The Stoxx Europe 600 Index declined 0.9 percent after climbing 1.3 percent yesterday, the biggest rally in four weeks. Eurasian Natural Resources Corp. sank 4.6 percent and Kazakhmys Plc slid 5.1 percent, leading a gauge of basic-resources producers in the benchmark index to an almost 10-month low. Vodafone Group Plc dropped 3.1 percent after Verizon Communications Inc. said it’s not considering a bid for the U.K. mobile-phone operator.
Spanish and Italian bonds gained as the International Monetary Fund said it had reached a staff-level agreement to contribute about 1 billion euros ($1.3 billion) to aid Cyprus. Spain’s 10-year note yield fell three basis points to 4.91 percent and Italy’s rate slipped three points to 4.59 percent.
The yields on Germany’s five-year yields were at 0.32 percent after slipping to 0.27 percent on March 28, the least since Dec. 10, as the government sold 3.29 billion euros of the notes at a yield of 0.33 percent. Germany last sold five-year securities on March 6 at an average yield of 0.45 percent. That compares with a record-low auction yield of 0.31 percent set on Aug. 1.
Japan’s Nikkei 225 Stock Average rose 3 percent as the central bank began a two-day meeting
The MSCI Emerging Markets Index fell for a third day, sliding 0.5 percent. Benchmark gauges in South Africa, the Czech Republic and Thailand dropped more than 1 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 0.5 percent and the Shanghai Composite Index dropped 0.1 percent as concern over a new strain of avian flu overshadowed data showing growth in the nation’s services industries.
South Korea’s Kospi index slipped 0.2 percent to a one-week low after North Korea prevented South Korean workers from entering a jointly run industrial park.
The dollar was weaker against 14 of 16 major peers, losing 0.5 percent to 92.96 yen and slipping 0.2 percent to $1.2848 per euro.