U.S. stocks fell, with the Standard & Poor’s 500 Index starting the year lower for the first time since 2008, as investors sold shares after the best annual gain in 16 years. Treasuries and gold climbed, while crude oil slid.
The S&P 500 (SPX) dropped 0.9 percent from a record to 1,831.98 by 4:24 p.m. in New York while the Stoxx Europe 600 Index lost 0.7 percent. Ten-year Italian bond yields reached the lowest level since May. The MSCI Emerging Markets Index retreated 1.2 percent as Chinese manufacturing slowed. Turkey’s lira slid to a record low versus the dollar. Gold rallied after sinking 28 percent last year, while oil slumped 3 percent, the most in 14 months. Ten-year Treasury yields fell four basis points to 2.99 percent after touching 3.05 percent, the highest since 2011.
About $9.6 trillion was added to the value of global stocks last year, the most in four years, as signs of a recovery in the global economy lured investors to developed-market equities. The first trading session of January had proven profitable for investors over the previous five years, with the S&P 500 gaining an average of almost 2 percent that day since 2009, according to data compiled by Bloomberg.
“Stocks and the market in general are elevated so heavily, so there’s always a risk in the company outlooks,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a phone interview. “I don’t think this sell-off will be a trend. In fact, I would expect the market to trade up into earnings season and January.”
Reports today confirmed factory output in the euro area expanded last month at the fastest pace since May 2011 as Italy’s manufacturing beat estimates and German production grew for a sixth month. U.S. jobless claims declined last week to the lowest level in a month while the Institute for Supply Management’s manufacturing index declined less than forecast.
The S&P 500 rallied 30 percent in 2013 to close at an all-time high of 1,848.36 Dec. 31. The advance sent the benchmark index’s valuation to 17.4 times reported earnings, the most expensive level since 2010, data compiled by Bloomberg show.
All 10 main S&P 500 groups retreated at least 0.5 percent today, with utilities dropping 1.5 percent for the biggest decline. Exxon Mobil Corp. slid 1.4 percent.
Coca-Cola Co., General Electric Co. and DuPont Co. tumbled at least 1.5 percent to lead a 0.8 percent decline in the Dow Jones Industrial Average after the 30-stock gauge jumped 27 percent in 2013 for its biggest gain since 1995.
Apple Inc. (AAPL:US) retreated 1.4 percent after Wells Fargo & Co. downgraded the stock and said profit margins may come under pressure later in the year with the iPhone 6 cycle. Newmont Mining Corp. advanced 4 percent as gold rebounded.
Jobless claims in the U.S. fell by 2,000 to 339,000 in the period ended Dec. 28, the Labor Department said. The median forecast of 26 economists surveyed by Bloomberg called for 344,000 claims. The ISM’s factory index fell to 57 in December from the prior month’s 57.3, which was the highest level since April 2011. Readings above 50 indicate expansion.
Equity returns will slow this year, Wall Street strategists forecast. The S&P 500 will end 2014 at 1,950, according to the average of 20 estimates compiled by Bloomberg. That represents a 5.5 percent gain from the end of 2013.
Analysts are predicting 116 stocks in the index will see price declines this year, according to average year-end targets compiled by Bloomberg. That’s the greatest number of bearish forecasts for the S&P 500 in nine years, the data show.
The average company in the index is estimated to rise 4.8 percent this year, according to the data. That’s the least optimistic forecast since Dec. 31, 2004, when the average was 4.7 percent. Alcoa Inc. (AA:US) and Harris Corp. are among the companies projected to fall the most this year.
The Stoxx 600 fell after rising as much as 0.3 percent earlier in the day. The index climbed 17 percent in 2013, its largest annual gain since 2009. It reached its highest level since May 2008 Dec. 31.
Fiat SpA (F) shares surged 16 percent after the carmaker agreed to buy the remaining stake in Chrysler Group LLC that it doesn’t already own. Exor SpA, its biggest shareholder, jumped 4.5 percent. Debenhams Plc climbed 3 percent after the retailer’s chief financial officer resigned. The stock slumped 12 percent Dec. 31 after the company said profit will drop in the first half of the financial year.
Ophir Energy Plc lost 8.2 percent after the U.K oil and gas explorer said it didn’t find hydrocarbons at a well in Tanzania. CGG SA slipped 3 percent after UBS AG lowered its rating on the surveyor of oilfields.
The Hang Seng China Enterprises Index of mainland Chinese companies listed in Hong Kong dropped 1 percent, the steepest loss since Dec. 20. Data yesterday showed China’s official purchasing managers’ index for manufacturing slipped to a four-month low in December, while a private report today also signaled factory output grew at a slower pace.
“The weaker PMI probably heralds a weak start of economic growth this year as China is still finding a new growth model,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “The weaker economy will hold back stocks and makes stock picks more difficult this year.”
China’s President Xi Jinping said in his first New Year’s address that the world’s second-largest economy must press ahead with reforms this year to bolster people’s livelihoods and make the country “rich and strong.”
Turkey’s lira slipped as much as 1.9 percent to 2.1886 per dollar and the country’s benchmark stock index fell 1.2 percent. The currency tumbled the most since September 2011 last month as a corruption probe racked Prime Minister Recep Tayyip Erdogan’s cabinet and led three ministers to quit.
Brazil’s real sank 1.1 percent versus the dollar as the central bank began a scaled-back program of support for the currency.
Thailand’s SET Index (SET) slumped 5.2 percent, the most since September 2011, and the baht slipped to the weakest level since 2010. Groups opposed to caretaker Prime Minister Yingluck Shinawatra’s plan to surround government ministries and occupy 20 major intersections in Bangkok Jan. 13 until she agrees to step down and allow an unelected council to reform the country’s electoral system, Suthep Thaugsuban, a former opposition lawmaker who is leading the movement, said yesterday.
South Korea’s Kospi Index (KOSPI) tumbled 2.2 percent, the steepest decline since July 2012, as Hyundai Motor Co. and Kia Motors Corp. forecast their weakest sales growth in eight years.
Italian 10-year yields dropped as much as 17 basis points to 3.96 percent, the lowest level since May, while the rate on two-year Spanish notes fell to as low as 1.16 percent, the least since Bloomberg started tracking the data in 1993.
The dollar strengthened against 14 of 16 major peers, rising 0.7 percent to $1.3667 per euro while weakening 0.5 percent to 104.72 yen.
Gold futures rose 1.9 percent, the most in three weeks, to $1,224.90 an ounce in New York on speculation that demand for bars and jewelry will increase in Asia. Platinum posted the biggest gain in more than two months, adding 2.9 percent, and silver jumped 3.5 percent after a 36 percent plunge in 2013.
West Texas Intermediate oil dropped 3 percent to $95.44 a barrel, the biggest decline since Nov. 7, 2012, and the lowest closing level in a month.
The cost of insuring against losses on corporate bonds was little changed, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies at 71 basis points. The gauge dropped 47 basis points last year, or 0.47 percentage point, following a 56-basis point decline in 2012.
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