Bloomberg News

Stocks, Commodities Retreat as Treasuries Advance on Jobs

May 04, 2012

A trader works on the floor of the New York Stock Exchange. Photographer: Peter Foley/Bloomberg

A trader works on the floor of the New York Stock Exchange. Photographer: Peter Foley/Bloomberg

Stocks tumbled, extending the biggest weekly loss of the year for global equities, after U.S. employers added fewer jobs than forecast and services and manufacturing output in the euro region shrank more than estimated. Treasuries rose and oil plunged below $100 a barrel.

The MSCI All-Country World Index lost 1.5 percent at 4 p.m. New York time, extending its weekly plunge to 2.4 percent. The Standard & Poor’s 500 Index sank 1.6 percent and lost 2.4 percent in the week, also its worst since December. The 10-year U.S. Treasury note yield fell five basis points to 1.88 percent. Oil dropped as much as 5 percent to lead commodities to their biggest three-day slide since September. The Dollar Index (DXY) rose for a fifth straight day, its longest advance in seven months.

Concern that weakening economic data will drag stocks lower in May for a third straight year grew after Labor Department data showed payrolls climbed by 115,000 in April, the smallest gain in six months and less than the median economist forecast of 160,000. A purchasing managers index in Europe dropped to 46.7, below the initial estimate of 47.4, London-based Markit Economics said today.

“The data point to sluggish job growth, declining labor market participation and for those employed, stagnant purchasing power,” Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., said in an e-mail today. “Consumption, as a growth engine, is less dynamic at a time when headwinds from Europe and a potential fiscal cliff are still material.”

Jobs Report

The Labor Department report showed private payrolls, which exclude government agencies, rose 130,000 after a revised gain of 166,000. They were projected to rise by 165,000, the survey showed. Factory payrolls grew by 16,000, the smallest in five months and less than the survey forecast of a 20,000 increase. The jobless rate unexpectedly fell to a three-year low of 8.1 percent as people left the labor force, while average hourly earnings rose a less-than-forecast 1.8 percent from last year.

Bank of America Corp., Cisco Systems Inc., JPMorgan Chase & Co. and Microsoft Corp. lost at least 2.4 percent to lead the Dow Jones Industrial Average down as much as 168.32 points to 13,038.27 as all 30 stocks retreated. Technology and energy companies fell the most among the 10 main S&P 500 groups, with utilities the only industry to advance. LinkedIn Corp. (LNKD:US) jumped 7.2 percent as the biggest professional-networking website reported sales and profit (LNKD:US) that topped analyst estimates.

Of the 419 companies in the index that have reported so far in the earnings season, 71 percent have posted per-share profit that topped estimates, according to data compiled by Bloomberg.

‘Deja Vu’

Today’s slump trimmed the S&P 500’s advance for 2012 to about less than 9 percent. The index has lost 3.5 percent since its four-year high on April 2, spurring bears to predict the gauge will mirror retreats of at least 15 percent from April peaks in 2010 and 2011 as economic growth slows. Birinyi Associates Inc., Northern Trust Corp. and Wells Capital Management say increasing investor anxiety is a contrarian sign that will give way to a rally after record profits left shares 10 percent cheaper than a year earlier.

“The specifics of the report aside, we’re getting a feeling of deja vu here,” Dan Greenhaus, chief global strategist at broker-dealer BTIG LLC in New York, said in a report. “Weak job growth and weak income growth is most unwelcome especially at a time when so many were banking on the exact opposite.

Treasury 10-year yields declined six basis points over the last five days in a seventh straight weekly decline, matching the longest stretch since the end of 2008. Thirty-year yields slid five basis points to 3.07 percent today and rates on two- year debt were little changed at 0.26 percent.

European Elections

The Stoxx Europe 600 Index lost 1.8 percent today to extend this week’s retreat to 2.4 percent. Wacker Chemie AG, the second-biggest producer of solar-grade silicon, fell 6.1 percent in Frankfurt after saying earnings before interest, taxes, depreciation and amortization for fiscal 2012 are expected to be ‘‘well below’’ the previous year.

European stocks fell as France, Germany and Greece prepared for elections this weekend. French voters go to the polls in a final runoff between President Nicolas Sarkozy and Socialist challenger Francois Hollande, while Germany’s Chancellor Angela Merkel’s party risks losing control of a state in a regional ballot. Greeks pick a new government in a national election.

The MSCI Emerging Markets Index (MXEF) dropped 1.1 percent. India’s Sensex Index sank 1.9 percent as the rupee weakened, spurring concern the government may find it hard to cool inflation and curb the fiscal deficit. The Micex Index lost 3.6 percent in Moscow, erasing its gain for the year.

Dollar Rallies

The dollar strengthened against all 16 major peers except the Japanese yen, which rallied versus all major counterparts. The U.S. currency climbed 0.5 percent to $1.3084 versus the euro as the shared currency weakened for a fifth straight day, its longest slump since September.

The S&P GSCI gauge of 24 commodities dropped 2.4 percent and extended its three-day loss to 5 percent, its worst slump in seven months. Crude also fell for a third day, the longest streak in four weeks, tumbling 3.9 percent to $98.49 a barrel in New York.

‘‘We’re in a situation where, quite frankly, the data is going to dictate what happens going forward and I suspect the data is going to be pretty choppy for a while,” Michael Hanson, senior economist at Bank of America Merrill Lynch, told Bloomberg Television. “The fundamentals in the economy, I think, still haven’t fully recovered. And so I think the market is going to reflect that and we’re going to be choppy in the market for a little while going forward.”

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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