“The Fed is looking for sustained improvement in the labor market,” John Canally, an economist and investment strategist at LPL Financial Corp. in Boston, said in a telephone interview. The firm oversees about $330 billion. “This report does push the Fed closer to quantitative easing. If the current trend continues, they are almost going to have to do something later this year.”
The government’s previous employment report on June 1 showed 69,000 jobs were created in May, the weakest growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. Since then, the S&P 500 had rallied 7 percent through yesterday and 10-year rates have increased.
The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa Inc. is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.
Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent.
Earnings at energy companies fell 16 percent to lead the decline among the 10 main groups in the S&P 500, the estimates show, followed by a 12 percent decrease in profits at raw- material producers. Crude oil tumbled 18 percent in the second quarter to drag the S&P GSCI Index of commodities down 13 percent, the worst declines for both since the final three months of 2008.
Five shares fell for each that advanced in the Stoxx Europe 600 Index, which slid 1 percent and trimmed its weekly gain to 1.3 percent. Spain’s largest banks, Santander SA and Banco Bilbao Vizcaya Argentaria SA, fell at least 3.9 percent. Fifteen of 19 groups in the Stoxx 600 retreated. Industrial production decreased for the ninth month in May, the National Statistics Institute in Madrid said.
A gauge of car companies tumbled 3.3 percent to lead declines after PSA Peugeot Citroen reported that first-half deliveries dropped 13 percent from a year earlier and its share of the European market declined. The region’s second-biggest carmaker tumbled 7.7 percent.