U.S. Stocks Fall as Copper, Oil Retreat on China Concern

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U.S. stocks fell from near a record while Treasuries climbed, as copper and crude oil led commodities lower amid concern that signs of a slowing economy in China will hurt demand. The yen strengthened.

The Standard & Poor’s 500 Index dropped 0.5 percent to a one-week low of 1,867.63. Yields on 10-year Treasuries fell one basis point to 2.77 percent by 5:04 p.m. in New York. The yen rallied the most in five weeks against the dollar as gold futures climbed amid safe-haven demand. Copper plunged 2.7 percent to the lowest level since July 2010. Oil touched $100 a barrel in New York for the first time since Feb. 14.

Chinese credit growth trailed analysts’ estimates in February, the country’s central bank said yesterday. China saw its first onshore bond default last week after a solar-panel maker failed to make an interest payment. Russia showed no signs of yielding in the standoff over Crimea as Ukraine bolstered its defenses. Germany’s current-account surplus exceeded estimates, while U.K. factory production rose more than predicted.

“China is a big importer of copper and intraday that triggered a little bit of fear in equities,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said by phone. “Copper is somewhat related to the health of the global economy, so that could have pushed people to take some money off the table.”

U.S. Stocks

Nine of the 10 main industries in the S&P 500 dropped today, with energy and materials stocks losing at least 1 percent to pace losses. The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, added 4.2 percent to 14.80.

Freeport-McMoRan Copper & Gold Inc. slid 2.1 percent for a fourth day of losses. DuPont Co. fell 2 percent after it said results will be “challenged” by the unusually cold North American winter. McDonald’s Corp. rose 3.8 percent after an executive said the company may look to cut costs and borrow more cash to return to investors.

The S&P 500 rallied 4.3 percent in February after Federal Reserve Chair Janet Yellen said the economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 176 percent from a 12-year low, as U.S. equities begin the sixth year of a bull market that started March 9, 2009.

“The equity market is going to make continued progress in a two steps forward, one step back kind of progression,” Jim Russell, who helps oversee $115 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “We’re still evaluating how much of the economic weakness is weather-related and how much of it is legitimate.”

ETF Flows

Investors have added $13.1 billion to U.S. equity exchange-traded funds in the past five days and withdrawn $8.2 billion from bond ETFs, data compiled by Bloomberg show. Real-estate stocks absorbed the most money among industry ETFs, taking in $564 million during the past week.

Copper futures for May delivery dropped 2.6 percent to $2.952 a pound on the Comex in New York, after touching $2.942, the lowest for a most-active contract since July 20, 2010. Prices are down 13 percent this year, the most among 34 commodities tracked by Bloomberg. The metal plunged yesterday after weekend data showed an unexpected drop in China’s exports.

Zinc, tin, lead and aluminum declined in London, while nickel advanced.

Default Concern

“People are starting to re-evaluate the China demand scenario, not only from economic data, but also from this first ever corporate-debt default inside the country,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “How many more companies out there are going to default?”

The S&P GSCI Index of 24 commodities slid 0.2 percent for a second day of losses.

West Texas Intermediate for April delivery dropped 1.1 percent to $100.03 a barrel on the New York Mercantile Exchange. Stockpiles are forecast to have gained 2 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report tomorrow.

The Bloomberg Dollar Spot Index was little changed after two days of gains.

The yen advanced versus all of its 16 major peers as copper retreated on the China concern. The Japanese currency appreciated 0.2 percent to 103.02 per dollar. Australia’s currency lost 0.5 percent while the South African rand fell 1 percent as business confidence in the country unexpectedly declined.

European Stocks

In Europe, equities pared earlier gains to close little changed. The Stoxx Europe 600 Index rose less than 0.1 percent after earlier gaining as much as 0.6 percent. A gauge of carmaker and auto-parts stocks jumped as much as 1.2 percent after a report showed German exports increased more than forecast in January.

Yields on Spanish bonds rose two basis points, or 0.02 percentage point, to 3.32 percent.

“Investors can be more confident if the core of Europe is doing well,” said Carsten Hilck, who oversees about $6.9 billion at Union Investment Privatfonds GmbH in Frankfurt. “Germany is still a very strong exporter and the economy is on the right track. Investors can get very nervous with geopolitical risk but there’s a lot of liquidity to stabilize the market as soon as prices come down.”

Russia’s Micex Index has lost 9.4 percent this month as President Vladimir Putin tightened his grip on Ukraine’s Crimea region in the Black Sea. The ruble has weakened 1.5 percent in the period, the worst performer after the Chilean peso among 24 emerging-market currencies tracked by Bloomberg.

Ukraine Mobilization

In addition to testing its military’s combat readiness, Ukraine may mobilize 20,000 people to protect borders, Interior Minister Arsen Avakov said today. Russia has vowed to defend the ethnic Russians who dominate the Crimean peninsula and has rejected the legitimacy of the new cabinet in Kiev after an uprising unseated Ukraine’s Moscow-backed leader.

Russia canceled its fifth ruble bond auction this year as the escalating tension in Crimea drives up the nation’s borrowing costs. The yield on Russia’s February 2027 bond rose 5 basis points to 8.91 percent after surging 50 basis points last week.

The MSCI Emerging Markets Index added 0.1 percent, while MSCI’s Asia Pacific gauge climbed 0.3 percent after declining 1.1 percent yesterday. Japan’s Topix Index capped its fifth advance in six days as the Bank of Japan maintained a pledge to expand the country’s monetary base.

The Topix added 0.5 percent to 1,233.21 at the close of trading in Tokyo as the central bank said it plans to expand the monetary base at a pace of 60 trillion yen ($581 billion) to 70 trillion yen per year.

Ukrainian bonds rose, with yields on April 2023 Eurobonds dropping 2 basis points to 10.36 percent. The hryvnia was little changed at 9.23 against the dollar.