Stocks fell, the euro weakened for a third day against the dollar and Germany’s five-year note yield fell to a record amid concern about employment markets in Europe and the U.S. Wheat led commodities lower.
The Standard & Poor’s 500 Index lost 0.3 percent to close at 1,402.31 at 4 p.m. in New York, paring an earlier loss of 0.9 percent as homebuilders and retailers rallied. The Dow Jones Industrial Average (INDU) retreated from a four-year high. The euro depreciated 0.6 percent to $1.3160 as the U.S. currency strengthened against most major peers. German five-year note yields sank as low as 0.55 percent and 10-year Treasury rates decreased less than two basis points to 1.93 percent, near a three-month low. Oil fell after a surge in inventories.
German unemployment rose in April as euro-area manufacturing shrank for a ninth month and more than initially estimated, according to reports today. American companies added 119,000 workers in April, according to figures from ADP Employer Services, 51,000 fewer than the median economist forecast and damping optimism about the economy before government jobs data in two days. U.S. factory orders decreased.
“I’ve got a feeling that we might see a downside surprise on the monthly jobs report,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said in an interview from Austin, Texas. His firm has $1.83 trillion in client assets. “We’ve got a weak ADP report. There’s a reemergence of concerns in Europe. Given how high the market is right now and this softening in economic data, it’s very likely to see a pullback in the range of 5 percent to 10 percent.”
The ADP data was forecast to show U.S. companies added 170,000 workers in April, according to economists’ forecasts compiled by Bloomberg. The Labor Department’s payrolls report for April will be released on May 4 and is forecast to show that employers added 160,000 jobs. A Commerce Department report today showed U.S. factory orders decreased 1.5 percent in March, compared with the median economist estimate for a 1.6 percent decline.
Energy and financial shares fell the most among the 10 main S&P 500 groups as ConocoPhillips tumbled 3.4 percent and Bank of America Corp. fell 1.8 percent to pace losses. Chesapeake Energy Corp. tumbled 15 percent after reporting an unexpected loss and saying it may run out of money next year under the weight of the lowest natural-gas prices in a decade. CVS Caremark Corp. (CVS:US) rose 2.7 percent as profit at the provider of prescription drugs beat projections.
Lennar Corp. and D.R. Horton Inc. rose more than 2.6 percent to help lead a gauge of homebuilders in S&P indexes to the highest level since September 2008. An International Strategy & Investment Group Inc. survey released yesterday showed sales by homebuilders climbed to a six-year high. The Los Angeles Times reported that the Federal Housing Finance Agency is under pressure to allow Fannie Mae and Freddie Mac to reduce loan principal amounts for struggling borrowers.
TripAdvisor Inc. surged 17 percent, the most in the S&P 500, after the online travel-recommendation service spun off from Expedia Inc. reported sales and profit that topped some analysts’ estimates. Earnings per share have exceeded the average analyst estimate at about three quarters of the companies in the index that posted results since April 10, according to data compiled by Bloomberg.
Almost two stocks declined for each that gained in the Stoxx Europe 600 Index, which slipped 0.4 percent. Vestas Wind Systems A/S (VWS) sank 5.6 percent to the lowest level since 2003. The biggest wind turbine maker said its loss widened 91 percent in the first quarter and it expects to spend more money on turbine maintenance after uncovering potential faults in 376 machines.
UBS AG, Switzerland’s biggest bank, climbed 3.7 percent after reporting it attracted more funds from wealthy clients than analysts anticipated and earnings beat estimates.
The 17-nation euro fell against 14 of 16 major peers. The dollar strengthened 0.1 percent versus the yen as it climbed against all 16 major peers except South Korea’s won and South Africa’s rand.
The 10-year Italian yield rose to 5.55 percent from 5.51 percent on April 30 after the country’s unemployment rate climbed more than economists forecast in March to the highest level since 2000, adding to signs an economic slump in the euro region is getting worse.
The German 10-year bund yields fell six basis points to 1.61 percent. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said today. Euro-region unemployment rose to a 15-year high of 10.9 percent in March from 10.8 percent in February, the EU statistics office said.
“These weak numbers reflect the deterioration we’ve been seeing in the euro zone, and what’s worrying is that this is not limited to troubled countries,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “We expect the euro to come under significant pressure on the back of these reports.”
The MSCI Emerging Markets Index (MXEF) advanced 0.4 percent, poised for the highest close since April 6. The Shanghai Composite Index (SHCOMP) jumped 1.8 percent and Taiwan’s Taiex Index (TWSE) gained 2.3 percent. The ISE National 100 Index (XU100) slipped 1.8 percent in Istanbul after S&P cut its outlook for Turkey’s long- term foreign and local currency debt ratings to stable from positive yesterday.
All 24 commodities tracked by the S&P GSCI Index declined except for cocoa, sending the gauge down 1.3 percent.
Oil, Wheat Slip
Crude oil futures lost 0.9 percent to $105.22 a barrel, after the U.S. Energy Department said stockpiles rose by 2.84 million barrels to 375.9 million, the highest level in 21 years.
Wheat fell more than 4 percent and corn dropped 3 percent as wet weather boosted prospects for emerging plants.
Gold futures dropped 0.5 percent to $1,654 an ounce after three voting members of the Federal Open Market Committee said they don’t see a need for more economic stimulus and as physical demand slumped in India, the world’s biggest importer.
John Williams, president of the San Francisco Fed, joined his counterparts from Richmond, Philadelphia and Atlanta in casting doubt on the need for additional purchases of bonds to push down longer-term interest rates even as American employers added fewer jobs than forecast.
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