S&P 500 Drops From Record; Oil Slides, Treasuries Rally
Stocks fell, pulling the Standard & Poor’s 500 Index down from a record, and commodities slid as reports showed weaker growth in global manufacturing and private U.S. payrolls. Treasuries remained higher as the Federal Reserve reiterated its commitment to asset purchases.
The S&P 500 Index slipped 0.9 percent to 1,582.7 as of 4 p.m. in New York. The S&P GSCI gauge of 24 commodities fell 2.1 percent as oil tumbled after U.S. inventories increased to the highest since 1931 and copper slid the most in a year. The Dollar Index declined for a fifth straight day, the longest slump of the year. Ten-year Treasury yields lost four basis points to 1.63 percent, the lowest level since December. Latin American and most European markets were closed for a holiday.
U.S., Chinese and Australian reports today signaled a slowdown in manufacturing as a U.K. Purchasing Managers’ Index showed a third month of contraction. ADP Research Institute said U.S. companies added 119,000 workers to payrolls in April, less than the median forecast of 150,000 jobs, while government data showed an unexpected decline in construction spending. The Fed said it will maintain its $85 billion in monthly bond purchases and is prepared to raise or lower the level as economic conditions evolve.
“This is going to give some pause to the stock market, maybe a little pullback until the data improves and follows the trend of the last few years,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview.
Gauges of energy and raw-material producers fell more than 1.6 percent to lead declines in all 10 of the main industry groups in the S&P 500. Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, dropped 4.7 percent. Marathon Petroleum Corp. sank 6.2 percent. QEP Resources Inc. lost 6.1 percent after earnings trailed analysts’ estimates.
Merck & Co. slid 2.8 percent after cutting its full-year forecast. Allergan Inc. slumped 11 percent after delaying further study of an experimental drug for age-related macular degeneration. Comcast Corp. and Viacom Inc. gained more than 1.3 percent after the media companies reported quarterly profits.
Fed Chairman Ben S. Bernanke is pressing on with his effort to boost employment as 11.7 million Americans remain jobless almost four years into the expansion. A report in two days is projected to show unemployment stayed at 7.6 percent in April.
“The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.
The Fed repeated that bond buying will continue “until the outlook for the labor market has improved substantially.” It also left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
“It’s more of the same,” Kevin Holt, who oversees the $9.7 billion Invesco Comstock Fund in Houston, said in a phone interview. “The existing policy guideline kind of continues. We didn’t expect anything different out of the Fed at this point of time. We had a good run. For the market to go higher at this point, we need to see stronger economic growth, we need to see more sustainable employment growth.”
The Institute for Supply Management’s manufacturing index fell to 50.7 from the prior month’s 51.3. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 84 economists surveyed by Bloomberg was 50.5. Commerce Department data showed U.S. construction spending unexpectedly slid 1.7 percent in March.
An exchange-traded fund tracking developing-nation shares fell the most in two weeks amid concern that the global economic recovery is faltering. The iShares MSCI Emerging Markets Index dropped 1.1 percent to $42.82 after surging 2.5 percent in two days.
Oil for June delivery slid 2.6 percent to $91.03 a barrel in New York. The Energy Information Administration said stockpiles jumped to 395.3 million barrels in the seven days to April 26, the most since the government began gathering weekly data in 1982. They were last at this level in 1931 using monthly data. OPEC production increased to a five-month high in April.
Aluminum declined 2.5 percent to $1,824 a metric ton. Alcoa Inc. said it may curtail up to 11 percent of its smelting capacity amid a price slump.
Copper fell 3.7 percent to $6,795 a ton. China is the biggest buyer of industrial metals and the largest energy consumer. Gold for immediate delivery fell 1.3 percent to $1,457.90 an ounce, after dropping 7.6 percent in April, the biggest monthly loss since December 2011. Tin follow gold and copper into a bear market today, slipping 1.9 percent to $19,975 a ton.
Markets in the U.K., Denmark and Ireland are open today while most others in Europe and Asia were closed for holidays. The FTSE 100 rose 0.3 percent, paring an earlier gain of as much as 0.7 percent. The FTSE All-Share Index (ASX) completed an 11th straight month of gains in April, the longest winning streak since the U.K. gauge was formed in 1962.
The European Central Bank announces its monthly interest-rate decision tomorrow, while the U.S. Labor Department publishes its jobs and unemployment report on May 3.
The Australian Industry Group said today its manufacturing index plunged 7.7 points to 36.7 last month. China’s PMI was at 50.6, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. That compared with the 50.7 median forecast of analysts and a March reading of 50.9.
U.K. PMI for April shrank less than economists forecast. The gauge was 49.8, compared with a prediction of 48.5, according to a Bloomberg News survey.
Global stocks rose in April, beating bonds, the dollar and commodities for a second month, as gold and copper slumped into bear markets and investors bet equities will benefit from unprecedented economic stimulus.
The MSCI All-Country World Index (SPX) of equities in 45 markets climbed 2.9 percent, including dividends, as the S&P 500 increased for the sixth straight month. Bonds of all types returned 1.1 percent on average during the month, the most since July, according to Bank of America Merrill Lynch’s Global Broad Market Index of 20,000 fixed-income securities. The Dollar Index slipped 1.5 percent in April. The S&P GSCI Total Return Index of 24 commodities dropped 4.7 percent in the month, the biggest decline since May.
Japan’s Topix (TPX) Index fell 0.6 percent today after gaining 13 percent in April, the most since March 1999. It’s rallied more than 60 percent from mid-November through yesterday as Japanese Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pledged to defeat 15 years of deflation.
“There are reasons why we are having a mid-year slowdown, and the same thing happened in 2010, 2011 and 2012,” said Michael Widmer, head of metal markets research at Bank of America Corp. in London, by phone today. “The question is whether there’s scope for improvement in the second half and I think there is. I think growth could start to improve out of the U.S., Europe and to some extent I think China should be reaccelerating.”
The pound rose to its strongest level in more than two months against the dollar after the report on U.K. manufacturing. Sterling strengthened 0.1 percent to $1.5551, climbing for a sixth day.
The euro rose 0.1 percent to $1.3181 as it strengthened against 11 of 16 major peers. The Dollar Index, a gauge of the currency against six major peers, slipped 0.1 percent to 81.64, falling for a fifth straight day and reaching the lowest level since February. Australia’s dollar fell for the first time in three days against its U.S. counterpart, weakening 1 percent to $1.0267.
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