U.S. Halts Global Stocks Drop on Job Data While Oil Jumps
U.S. stocks rose, halting a global slide, as reports signaling an improving job market overshadowed concern over political instability in Portugal and Egypt. Oil rallied above $100 a barrel as American stockpiles declined.
The Standard & Poor’s 500 Index (SPX) closed 0.1 percent higher at 1,615.41 by 1 p.m. in New York, reversing a loss of as much as 0.6 percent. The MSCI All-Country World Index dropped 0.3 percent, paring a decline of as much as 0.8 percent. Portugal’s main equity gauge sank 5.3 percent, the most in three years, and 10-year bond yields rose as much as 139 basis points to 8.11 percent. Yields on U.S. Treasuries due in a decade reversed early declines to increase three basis points to 2.5 percent. West Texas Intermediate crude jumped 1.7 percent to $101.24 a barrel. The yen surged against 12 of 16 major peers.
Reports today showed U.S. companies boosted employment and jobless claims fell before the Labor Department’s monthly payrolls figures due July 5. The data will be scrutinized by investors trying to determine if the economy is strong enough for the Federal Reserve to begin reducing its $85 billion in monthly bond purchases. The S&P 500 has retreated 3.2 percent from its most recent high May 21 after Fed Chairman Ben S. Bernanke signaled they could taper stimulus should the job market continue to improve.
“This is a market environment where good news is good news and bad news will probably be interpreted as good news, so it means a little something for both camps: those in favor of tapering and those who are less enthused about it,”Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC in Philadelphia, which manages about $58 billion, said by telephone.
About 3.6 billion shares changed hands in the U.S., 46 percent below the three-month average, as exchanges closed early in New York. Bond markets shut at 2 p.m. and American financial markets will be closed tomorrow for the Independence Day holiday.
Among stocks moving today, Chipotle Mexican Grill Inc. advanced 3.5 percent following an analyst upgrade. Bank of America Corp. and Citigroup Inc. declined as S&P downgraded three European lenders. Alcoa Inc. fell 1.2 percent as JPMorgan Chase & Co. cut the stock’s rating. Robert Half International Inc. lost 5.2 percent as Deutsche Bank AG said a decision by President Barack Obama’s administration to delay a mandate requiring businesses to provide workers health insurance is negative for staffing service providers.
The ADP Research Institute said today that U.S. employers added 188,000 jobs in June, more than the 160,000 median estimate in a Bloomberg survey. Jobless claims decreased by 5,000 to 343,000 in the week ended June 29 from a revised 348,000 in the prior period that was higher than initially reported, the Labor Department said today. The Bloomberg survey median called for 345,000 claims.
The July 5 Labor Department report is forecast to show the nation added 165,000 jobs in June and the unemployment rate declined to 7.5 percent from 7.6 percent, according to the median of economists’ estimates.
The Institute for Supply Management’s non-manufacturing index dropped to 52.2 in June from 53.7 the prior month. The median forecast in a Bloomberg survey called for a rise to 54. A reading greater 50 indicates expansion in the industries that make up almost 90 percent of the economy.
The Stoxx Europe 600 Index slid 0.6 percent, with trading volumes 14 percent higher than the 30-day average.
A gauge of banks lost 1.1 percent to help lead declines among 19 groups in the Stoxx 600. Barclays Plc, Deutsche Bank AG and Credit Suisse Group SA retreated at least 0.8 percent after S&P cut its rating for the three lenders, citing increased risks to their investment-banking businesses.
Banco Espirito Santo SA and Banco Comercial Portugues SA, Portugal’s largest lenders, fell more than 10 percent.
Volatility on Portuguese bonds was the highest among developed markets today, followed by those of Spain, according to measures of 10-year debt, the yield spread between two- and 10-year securities, and credit-default swaps.
The extra yield investors demand to hold Portuguese 10-year bonds over similar-maturity German bunds reached 646 basis points, the most since November. German 10-year bund yields fell four basis points to 1.66 percent.
The resignation of two government ministers signaled Portugal will struggle to implement further budget cuts as its bailout program enters the final 12 months.
“Portugal’s political crisis clearly expresses austerity fatigue,” Holger Schmieding, an economist at Berenberg Bank in London, wrote in a report. “If Portugal were to turn away decisively from the ‘tough love’ politics of austerity and reform, it could pose a major dilemma. Softening the bailout conditions too much could invite other countries to also slacken their efforts. But not softening the bailout conditions at all could raise the risk of failure in Portugal.”
The MSCI Emerging Markets Index fell for a second day, sliding 2.1 percent, the most since June 20. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 3.3 percent and the Shanghai Composite Index retreated 0.6 percent after a report showed growth China’s services industry slowed. Turkey’s benchmark gauge dropped 3.5 percent and two-year yields jumped 48 basis points to 8.74 percent after inflation accelerated more than estimated.
Brazil’s Ibovespa Index lost 0.4 percent after slumping 4.2 percent yesterday, the most in almost 22 months, as Nomura Holdings Inc. predicted the nation may enter a recession this year.
Egyptian pound forwards weakened the most in six months and stocks fell after President Mohamed Mursi rebuffed the military’s deadline to end the political crisis. Clashes between his supporters and opponents have left at least 23 dead over the past day.
Oil reached a 14-month high in New York following data showing the largest decline of the year for U.S. stockpiles and concern the turmoil in Egypt will disrupt supplies from the Middle East.
Mursi’s ouster took place after markets closed in New York. The military suspended the constitution and announced an early presidential election in a bid to resolve the political crisis that has polarized the nation.
Egypt controls the Suez Canal and the Suez-Mediterranean Pipeline, through which 2.24 million barrels a day of oil was shipped from the Red Sea to Europe and North America in 2011, according to the U.S. Energy Department.
“Geopolitical risk in Egypt is stoking some demand from those who want to increase stockpiles just in case of a disruption in oil supplies,” said Leo Baek, a trader at KEB Futures Co. in Seoul. “Improving U.S. data is also adding fuel to demand for energy.”
The S&P GSCI (SPGSCI) gauge of 24 commodities gained 1.3 percent, the third consecutive advance. Cocoa, silver and gasoline jumped more than 1.8 percent to help lead the advance.
The yen strengthened 0.7 percent to 99.91 per dollar, climbing for the first time in five days. Japan’s currency appreciated 0.5 percent to 129.97 yen per euro.
The Australian dollar dropped to the weakest level since August 2010 after Reserve Bank Governor Glenn Stevens said the currency has been too high and the economy “will probably get” a lower currency if needed. The Aussie slid 0.7 percent to 90.87 U.S. cents.
The pound rose after a report showed U.K. services expanded more than analysts forecast last month. Sterling climbed 0.8 percent to $1.5283.
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