U.S. and European stocks slid, the euro weakened and commodities declined after data showed an unexpected contraction in German manufacturing and Cyprus’s president worked on a new plan to obtain a European bailout.
The Standard & Poor’s 500 Index lost 0.6% at 2:59 p.m. in New York, with technology shares slumping after Oracle Corp.’s results missed analyst estimates. The Stoxx Europe 600 Index sank 0.7%. Ten-year Treasury yields lost three basis points to 1.93%. The euro fell against 13 of 16 major peers. Oil and gasoline led commodities lower and natural gas retreated after topping $4 per million British thermal units for the first time since 2011. The yen erased yesterday’s 0.9% slump versus the dollar.
An index of German manufacturing unexpectedly slid to 48.9 this month and services fell to 51.6, while a composite gauge of both industries in the euro area contracted more than forecast. Fewer Americans than forecast filed jobless claims last week. Other reports showed sales of previously owned U.S. homes rose to the highest level in more than three years and a gauge of leading economic indicators topped estimates.
The market “is quite entitled to a breather and I think it may be taking a breather right now,” David Kelly, the New York-based chief global strategist at JPMorgan Funds, said in a phone interview. “The U.S. economic story continues to improve,” he said. “We still have some European concerns because the Europeans have to figure out a solution for Cyprus.”
U.S. stocks rose for the first time in four days yesterday, sending the S&P 500 within 0.5% of its 2007 record, and commodities gained as policy makers weighed bailout options for Cyprus and the Federal Reserve said it will keep up its bond buying. Fed Chairman Ben S. Bernanke said the central bank would alter its monthly bond buying in response to gains in the job market, underscoring a need for flexibility as he expands Fed assets beyond a record $3 trillion.
Technology companies in the S&P 500, which account for 18% of the index and are the biggest industry among 10 groups, dropped 1.1% today and were the biggest drag on the benchmark gauge. Oracle Corp. sank 9.3%, the most since 2011, after results missed estimates as corporate customers transitioning to Web-based programs bought less hardware and software.
Cisco Systems Inc., International Business Machines Corp. and Hewlett-Packard Co. slid more than 1.3% to lead the Dow Jones Industrial Average down as much as 123 points.
The S&P 500 is approaching a record almost 5 1/2 years after peaking and two years after most stocks in the gauge fully recovered from the worst bear market since the 1930s. The index has climbed 130% since March 2009, adding $10 trillion to the value of American equity as it erased losses from the credit crisis.
The majority of companies surpassed their previous highs by April 2011, according to data compiled by Bloomberg. The S&P 500 Equal Weighted Index, which counts each company in the index equally instead of by their market value, increased 192% from the bottom. Unlike past bull markets, where a single industry dominated, all groups have improved in this rally as the U.S. economy recovers. The breadth of the rebound can be seen in the S&P 500’s weightings, where none of the 10 industry measures represents more than 18% of the index.
Futures on the S&P 500 remained lower before the open of U.S. exchanges today as applications for jobless benefits increased by 2,000 to 336,000 in the week ended March 16, Labor Department figures showed today. Economists projected 340,000 claims, according to the median estimate in a Bloomberg survey.
U.S. home sales increased 0.8% to a 4.98 million annualized rate, the National Association of Realtors said today. The Conference Board’s index of U.S. leading indicators rose 0.5% in February, more than forecast, indicating the world’s largest economy is strengthening.
The Fed Bank of Philadelphia’s general economic index rose to 2 in March from minus 12.5 the prior month. Readings lower than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
“We see the economy as being much more fragile than the market is acting right now,” Eric Thorne, who helps oversee about $6 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “We haven’t seen any major resolution to these issues we were hearing about a couple years ago, yet stocks have decided to really ignore what’s going on there and reach new all-time highs any way. Europe and the surrounding economies having trouble could well be the reason that the market decides to pause here for a while.
The Stoxx 600 fell for the fourth time in five days, bringing the decline from last week’s 4 1/2-year high to 1.4%. Lanxess AG sank 6% as the German chemical maker forecast a larger-than-estimated drop in profit amid weakening demand in the tire and automotive industries. BASF SE, the world’s biggest chemical company, retreated 3.1% and Brussels-based Solvay SA lost 3.6%.
The euro slipped 1.4% vs. the yen and lost 0.2% to $1.2909 to trade near its lowest levels of the year. The composite gauge of purchasing managers in manufacturing and services industries fell to 46.5 from 47.9 in February, London-based Markit Economics said today. Analysts had forecast a reading of 48.2, according to the median of 23 estimates in a Bloomberg survey. A reading below 50 indicates contraction.
‘‘German economic data is the lung of the European economy,” said Yves Marcais, an equity sales trader at Global Equities in Paris. “When things there slow, it weighs on confidence.”
The yen advanced vs. 15 of its 16 counterparts. Haruhiko Kuroda gave his first press briefing as central bank governor, saying that he will do everything possible to beat deflation and the Bank of Japan won’t finance or underwrite government bonds.
The pound strengthened as much as 0.7% to a three- week high of $1.5210 after a government report showed retail sales increased more in February than economists forecast.
The yield on Spain’s 10-year bond fell 10 basis points to 4.88% after the government sold 4.5 billion euros ($5.8 billion) of securities at an auction, exceeding its maximum target of 4 billion euros. Yields on French, German, Italian and Swedish debt also lost at least two basis points.
Euro-area finance chiefs, pressuring Cyprus to shrink its banking system as the condition for a bailout, are reviving demands they jettisoned last week as too extreme, four European officials said. Finance ministers are considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, said the four officials, who asked not to be named because the talks are ongoing. The ministers are holding a teleconference tonight.
Cyprus Popular Bank Pcl and the Bank of Cyprus Plc would be split to create a so-called bad bank, one of the officials said. Insured deposits -- below the European Union ceiling of 100,000 euros ($129,000) -- would go into a so-called good bank and not sustain any losses, while uninsured deposits would go into the bad bank and be frozen until assets could be sold, said the four officials.
The MSCI Emerging Markets Index slid 0.5% to its lowest level of the year as benchmark gauges in Brazil, South Korea, Indonesia, Thailand and Poland fell at least 0.4%.
KGHM Polska Miedz SA, which gets 17% of its revenue from Germany, slid 2.5% in Warsaw. Indian automakers Bajaj Auto Ltd. and Tata Motors Ltd. fell at least 4.2%. Tencent Holdings Ltd., China’s largest Internet company, slumped 4% in Hong Kong as analysts cut share price forecasts. Brazil’s Bovespa Index headed for a four-month low as miner MMX Mineracao & Metalicos SA dropped a seventh day.
The S&P GSCI Index of 24 commodities slipped 0.6%. Gasoline lost 1.6% to $3.0672 a gallon, while New York crude oil slipped 0.5% to $92.47 a barrel.
Natural gas futures slid after trading at an 18-month high above $4 in New York following a government report showing that U.S. stockpiles declined by less than expected last week. Gas slipped as much as 1.7% after rising to $4.025 per million British thermal units, the highest price since Sept. 15, 2011. Energy Information Administration data showed that inventories fell 62 billion cubic feet in the week ended March 15 to 1.876 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected withdrawal of 70 billion.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.