Stocks slipped, pulling the Standard & Poor’s 500 Index down from near a five-year high, as speculation increased the U.S. budget deal won’t reduce the deficit fast enough. The yen and dollar strengthened.
The S&P 500 lost 0.1 percent at 9 a.m. in New York after surging 2.5 percent yesterday in its biggest gain in a year. The Euro Stoxx 50 Index of the biggest companies in the currency region declined 0.4 percent, retreating from a 17-month high. The yen gained versus all 16 major peers and the dollar touched its strongest level in almost three weeks against the euro. Ten- year Treasury yields rose for a third day, while the U.K. 10- year gilt yield climbed above 2 percent for the first time since May.
BlackRock Inc.’s Laurence D. Fink, who heads the world’s largest asset manager, lowered his expectations for stocks in the first quarter after saying yesterday he’s disappointed by the bill U.S. lawmakers passed to avert spending cuts and tax increases. The package won’t cut deficits enough to avoid a sovereign-rating downgrade, Moody’s Investors Service said. Reports showed U.S. companies added more workers than projected in December, while jobless claims grew more than forecast.
“When you look at the actual details of the deal struck it just doesn’t look as if we’re doing anything more than a short term kicking of the can down the road,” Stewart Richardson, chief investment officer at RMG Wealth Management LLP, said on Bloomberg Television. “Obviously the next several months are going to be potentially fraught in Washington in terms of the spending cut negotiations, the debt ceiling. There’s a lot of work to be done.”
The S&P 500 surged 4.3 percent over the previous two sessions, bringing it within four points of a five-year high reached in September. Mellanox Technologies Ltd. tumbled in pre- market New York trading today after the Israeli developer of data-management technology reduced its revenue guidance on weaker demand.
Companies added 215,000 workers, beating the median forecast of 36 economists surveyed by Bloomberg that called for a December advance of 140,000, data from the ADP Research Institute showed today. Applications for jobless benefits increased 10,000 to 372,000 in the week ended Dec. 29, the Labor Department reported today in Washington. Economists forecast 360,000 claims, according to the median estimate in a Bloomberg survey.
The Labor Department releases non-farm payrolls for December tomorrow. They rose by 150,000 workers last month after a 146,000 gain in November, according to the median forecast of 74 economists surveyed by Bloomberg. The unemployment rate held at 7.7 percent, the lowest since December 2008, according to economists’ estimates.
Two stocks fell for every one that rose in the Euro Stoxx 50 as Iberdrola SA, Spain’s biggest utility, slid 2.5 percent. The broader Stoxx Europe 600 Index gained 0.3 percent, extending a 22-month high, as Swiss shares rallied. The Swiss Market Index jumped 2.5 percent, with Cie. Financiere Richemont SA and Credit Suisse Group AG surging more than 4 percent, as the resumption of trading following the New Year holiday gave investors their first chance to react to the U.S. budget deal.
German unemployment increased less than economists forecast in December, the Nuremberg-based Federal Labor Agency said today.
The yen appreciated 1.1 percent against the euro and the dollar advanced 0.6 percent to $1.3111 per euro, the strongest level since Dec. 14.
The yield on 10-year U.S. Treasuries rose one basis point to 1.85 percent after rising eight basis points yesterday, the most since October. The yield on 10-year gilts rose one basis point to 2.002 percent. It’s the first time the yield has risen above 2 percent since May 10.
Predicting the consequences of a rating change by S&P or Moody’s may be little better than flipping a coin, with yields moving in the opposite direction than suggested 47 percent of the time, according to data compiled by Bloomberg in June on 314 upgrades, downgrades and outlook changes going back to 1974. Yields were measured after a month relative to U.S. Treasury debt, the global benchmark.
Treasuries have gained about 6.1 percent since S&P cut the grade of the U.S. one step to AA+ in August 2011, according to Bank of America Merrill Lynch indexes, with 10-year yields tumbling to an all-time low of 1.379 percent on July 25 last year.
Oil in New York declined 0.4 percent to $92.73 a barrel. Copper erased earlier gains, trading 0.3 percent lower after yesterday’s 3.5 percent advance, the most since Sept. 14. The London Metal Exchange index of industrial metals yesterday rallied to a three-month high on the U.S. budget agreement.
The MSCI Emerging Markets Index advanced 0.1 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.8 percent after a report showed China’s services industries expanded at the fastest pace in four months. India’s Sensex added 0.3 percent, while benchmark gauges in Poland, the Czech Republic and South Korea fell at least 0.4 percent.