U.S. stocks fell, while Treasuries gained with gold, as demand for haven assets climbed amid concern that tension among western nations and Russia over Ukraine will hurt the global economic recovery.
The Standard & Poor’s 500 Index slid 0.6 percent at 4 p.m. in New York to close below its average price for the past 100 days for the first time since April. The Stoxx Europe 600 Index dropped 0.7 percent to a three-month low. The rate on 10-year Treasuries plunged six basis points to a two-month low while Germany’s two-year yield touched minus 0.004 percent. Emerging equities slid to a six-week low and gold rose to a two-week high.
Russia announced an array of bans on food imports from western nations, as the standoff with the U.S. and its allies over Ukraine escalated into the worst such conflict since the Cold War. The European Central Bank kept interest rates unchanged at record lows as the crisis strengthened the headwinds facing the euro area’s recovery. U.S. equities initially rose after a decline in jobless claims last week sent the average over the past month to an eight-year low.
“The uncertainty over the situation in Ukraine has overshadowed the positive economic data we saw earlier today,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “The market has adapted to the positive data, but when it comes to geopolitical tensions, it’s hard to adapt. Tensions rise and we’re reaching the last level before the situation spins out of control.”
The U.S. equities benchmark extended losses in afternoon trading, with the gauge falling below 1,905 for the first time since May before paring the retreat. Contracts on the E-mini S&P 500 futures slid to as low as 1,899.75 before turning higher. That marked the first time in three months the contract breached 1,900.
The S&P 500 has lost 4 percent since reaching a record of 1,987.98 on July 24. The Dow Jones Industrial Average dropped 0.5 percent to 16,368.33, close to its 200-day moving average.
The broader gauge fell below its 100-day moving average today and European equities tumbled after NATO Secretary General Anders Fogh Rasmussen urged Russia to “step back from the brink” by pulling back troops and halting aid for rebels.
Russia has massed troops along its border with Ukraine, prompting the U.S. to say there’s a risk of an invasion. President Vladimir Putin retaliated yesterday against EU and U.S. sanctions by ordering restrictions on food imports from countries that seek to punish Russia. The government also threatened to target the automotive, shipping and aerospace industries.
Separately, the U.S. is considering airdrops of aid for thousands of refugees driven from their homes by Islamist militants in Iraq, and possible airstrikes against the insurgents, according to a defense official.
The potential escalation in U.S. involvement comes as the Islamic State, the group that seized swathes of northern Iraq in June, extended its advance today by seizing the Mosul dam, the country’s largest.
The U.S. 10-year yield dropped six basis points to 2.41 percent, the lowest intraday level since May 29. Thirty-year bond yields declined three basis points to 3.24 percent.
The Ukraine crisis overshadowed data showing fewer Americans filed applications for unemployment benefits last week. That sent the average over the past month to an eight-year low, a sign the labor market continues to gain momentum.
The S&P 500 slid 2.7 percent last week, its biggest drop since June 2012. The gauge has gone without a 10 percent correction since 2011 and remains higher by 3.3 percent this year.
Among stocks moving today, Aetna Inc. (AET:US) sank 4 percent to lead a 1.1 percent plunge in health-care shares. Phone and and materials shares lost 0.9 percent. Tyson Foods Inc. slid 1.5 percent after Russia banned billions of dollars of food imports from the U.S. and other nations in retaliation for sanctions.
21st Century Fox Inc. climbed 4.9 percent for the biggest gain in the S&P 500 as “X-Men: Days of Future Past” and “Rio 2” led to a jump in income at its film business.
The MSCI Emerging Markets Index lost 0.7 percent to the lowest level since June. The Shanghai Composite Index sank 1.3 percent, the most in more than a month. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 0.9 percent, its third day of declines.
Russia’s Micex (INDEXCF) fell as much as 2.1 percent before trimming declines. Retailers dropped on concern the import ban will cut earnings. OAO Magnit, the nation’s largest food retailer, slumped 5.2 percent.
The dollar advanced 0.1 percent to $1.3365 per euro after touching $1.3333 yesterday, the strongest since Nov. 8. The euro fell 0.2 percent to 136.38 yen. Japan’s currency was little changed at 102.05 per dollar.
The Bloomberg Commodity Index (BCOM) of 22 raw materials fell 0.4 percent after gaining 0.8 percent yesterday. Lean hogs dropped 2 percent, zinc fell 1.2 percent and wheat declined 1.1 percent. Arabica coffee for September delivery slid more than 3 percent, the most in four months.
Gold futures climbed 0.3 percent to $1,312.50 an ounce, the highest for a most-active contract since July 22.
ECB President Mario Draghi said today the risks to the euro-area recovery from conflicts including that in Ukraine are increasing. Data today showed German industrial output grew less than forecast in June, while a report yesterday indicated Italy slipped back into recession.
“Heightened geopolitical risks, as well as developments in emerging-market economies and global financial markets, may have the potential to affect economic conditions negatively,” Draghi said. He has said large-scale asset purchases, or quantitative easing, are an option for dealing with a severe economic shock.
Bond-market gains sent yields on 10-year securities to record lows in Austria, Finland and the Netherlands, while the rate on U.K. gilts dropped below 2.5 percent for the first time in almost a year.
“The fundamentals have deteriorated in Europe,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “Markets are maybe even starting to price in that some time down the road we could see more easing from the ECB. Yields could stay negative if Ukraine continues to escalate.”
The Stoxx 600 sank 0.7 percent to the lowest since April 15. Adidas AG lost 4.8 percent after the world’s No. 2 sports-gear maker cut its 2014 profitability forecast. Munich Re slipped 2 percent after the world’s biggest reinsurer posted earnings that missed analyst estimates.
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