U.S. stocks slip after biggest S&P 500 rally in year; Yen gains

Yen & dollar strengthen

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.

Jobless Claims

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.

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