Treasuries Rise, Stocks Swing Before Payrolls; Gas SinksNick Taborek and Julia Leite
Treasuries rose and the Standard & Poor’s 500 Index closed little changed for a second day as investors awaited U.S. jobs data. Emerging-market shares slid to a four-month low while natural gas sank, as copper drove a drop in commodities amid concern China’s economy is slowing.
Ten-year Treasury yields fell three basis points by 4:48 p.m. in New York, declining for the third time in four days after an auction. The S&P 500 rose less than 0.1 percent while Alcoa Inc. slid in after-hours trading after profit came in below analysts’ estimates. The MSCI Emerging Markets Index slipped 1 percent. The S&P GSCI commodities index fell to a two-month low as copper and gas lost more than 1.7 percent, while corn tumbled to a 40-month low. Canada’s dollar weakened.
Investors are examining jobs data for clues to the timeline for cuts to Federal Reserve stimulus, with jobless claims dropping more than economists estimated before data tomorrow projected to show employment stabilized in December. Chinese inflation eased more than expected last month while producer prices extended declines. Earnings from aluminum producer Alcoa unofficially kicked off the U.S. reporting season.
“You could be seeing some anticipation that the jobs number tomorrow could be really high,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “That could change the timetable for the Fed’s ultimate exit from quantitative easing.”
The U.S. jobless rate will probably hold at 7 percent for December, after falling from 7.3 percent in the previous month, a Bloomberg survey of economists shows.
The Labor Department also releases payrolls data tomorrow, with the number of nonfarm workers added by employers projected to be 197,000 last month, after gaining more than 200,000 in the previous two months. The report may also show the world’s largest economy added more jobs in 2013 than at any point in the past eight years, according to economists.
The S&P 500 erased and earlier decline of as much as 0.4 percent as investors weighed sales reports from retailers. Alcoa reported fourth-quarter adjusted earnings-per-share that came in below the median analyst estimate. The largest U.S. aluminum producer also said it took a $1.7 billion impairment charge. Shares slipped more than 4 percent after the close of trading.
Bed Bath & Beyond Inc. led decliners in the S&P 500, sinking 12 percent after projecting earnings that came in below analysts’ predictions. Macy’s Inc. jumped 7.6 percent after forecasting profit for the next fiscal year that beat estimates.
Family Dollar dropped 2.1 percent and L Brands Inc. fell 4.1 percent after the retailers cut profit forecasts amid disappointing December sales. Shares of Intercept Pharmaceuticals Inc. almost tripled in value after a clinical trial of its liver disease drug worked well enough for the testing to be stopped early.
Analysts predict that companies in the S&P 500 will increase their earnings by 9.7 percent on average this year and revenue by 3.8 percent, according to estimates compiled by Bloomberg.
Data today showed applications for U.S. unemployment benefits fell to the lowest level in a month, with initial jobless claims dropping to 330,000 last week, down from 339,000 in the previous period and compared with a median economist estimate for 335,000 claims.
Yields on 10-year U.S. Treasuries slipped to 2.96 percent. A $13 billion auction of 30-year Treasury notes drew a yield of 3.899 percent, compared with the median estimate of 3.914 percent in in a Bloomberg survey of 10 of the Fed’s 21 primary dealers.
The S&P 500 also ended the session little changed yesterday as minutes from the Federal Reserve’s December meeting fueled speculation that cuts to the central bank’s bond buying program may be accelerated. Officials saw diminishing economic benefits from asset purchases, according to the minutes of the meeting, where the Fed decided to reduce buying by $10 billion starting this month. They didn’t describe a set schedule for the pace of reductions.
Canada’s dollar slipped a fourth day, declining 0.2 percent to C$1.0839. It touched C$1.0865, the weakest level since 2009, amid speculation slowing employment growth will push the Bank of Canada closer to considering lowering interest rates.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, fell 0.1 percent to 1,028.21 after earlier climbing 0.2 percent to 1,030.42, the highest level since Sept. 9. The gauge rose the past two days.
The euro added 0.2 percent to $1.3606 after declining as much as 0.2 percent to $1.3549, the lowest level since Dec. 5.
European Central Bank President Mario Draghi said officials have strengthened their resolve to keep key interest rates low for an extended period. The euro area may face a prolonged period of low inflation, Draghi said, as policy makers left the key interest rate at a record-low 0.25 percent and data indicated the region’s economy is recovering.
Spain’s two-year note yield fell below 1 percent for the first time, dropping as much as nine basis points, or 0.09 percentage point, to 0.95 percent, the lowest level since Bloomberg started collecting the data in 1993. The 10-year yield was little changed at 3.78 percent. The government sold 3.53 billion euros ($4.8 billion) of five-year notes at a record-low yield of 2.382 percent.
European stocks dropped 0.4 percent, erasing an earlier gain of 0.4 percent, on trading volumes that were 55 percent higher than the 30-day average, according to data compiled by Bloomberg.
MSCI’s emerging-markets gauge has retreated every day this year except for yesterday, when it gained 0.2 percent. Data today showed China’s producer-price index fell 1.4 percent from a year before, the 22nd straight drop, and consumer prices rose 2.5 percent -- less than the 2.7 percent median forecast in a Bloomberg survey. Today’s releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers.
A gauge of Chinese companies listed in Hong Kong dropped 1.7 percent, closing at its lowest level since Sept. 2. The Shanghai Composite Index lost 0.8 percent to a five-month low.
“China is slowing down; what they don’t want is a hard landing,” Quincy Krosby, a market strategist at Prudential Financial Inc. in Newark, New Jersey, said by phone. Her firm oversees more than $1 trillion. “There’s also an adjustment process as the Fed begins to taper. As the data begin to gain more traction than initially expected, you’d have the Treasury market making adjustments, and that affects the emerging markets.”
The Borsa Istanbul 100 Index fell 1.4 percent. Morgan Stanley said it sees downside risks to Turkey’s growth as a result of “political uncertainty” and it remained bearish on the currency, credit and equities, according to a report dated today.
The S&P GSCI gauge dropped 0.8 percent to the lowest level since November amid the eighth decline in nine sessions. The index fell as much as 1.2 percent today.
Copper fell the most in eight weeks, with futures for March delivery settling 1.3 percent lower at $3.299 a pound in New York, as the data from China and the U.S. fueled concern demand from the two biggest users of the metal may wane.
Natural gas futures slipped for a third day in New York, sliding 5 percent as meteorologists predicted a period of warmer weather after this week’s arctic chill dissipates.
West Texas Intermediate crude retreated 0.7 percent to $91.66 a barrel in New York. Futures touched $91.24, the lowest level since May 2, amid surging U.S. output and ample inventories.
Corn declined as much as 0.6 percent to $4.1450 a bushel after trading at the three-year low of $4.14 yesterday. Stockpiles of corn in the U.S., the world’s top grower, are rising at the fastest pace in 19 years as a record crop overwhelms increased demand for the grain used to make livestock feed and ethanol.
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