Back to the inflation trade

Treasuries fell, sending 10-year yields up from almost a three-month low, and U.S. stocks fluctuated as investors dissected reports showing weaker-than- forecast job growth and acceleration in service industries. Silver and gold paced gains in commodities.

Ten-year yields increased four basis points to 2.67 percent while the S&P 500 was little changed near the 1,755 level at 1:12 p.m. in New York, erasing an earlier loss of as much as 1 percent. The Stoxx Europe 600 Index increased 0.1 percent and the MSCI Asia Pacific Index advanced 0.7 percent. The S&P GSCI Index of 24 raw materials rose 0.2 percent as coffee jumped almost 5 percent, silver climbed 1.9 percent gold added 0.4 percent. Greek 10-year yields declined 29 basis points on speculation bailout terms will be eased. Japan’s currency rose against 12 of its 16 major counterparts.

Companies in the U.S. boosted payrolls by 175,000 in January, according to ADP Research Institute, less than the 185,000 predicted in a Bloomberg survey. About $3 trillion has been erased from the value of equities worldwide this year amid a selloff in emerging-market currencies as China’s economy slows and the Federal Reserve cuts back stimulus. Riskier assets remain vulnerable with China’s economy a “wild card,” Pacific Investment Management Co.’s Bill Gross said yesterday.

“There’s uncertainty around the economic outlook,” said Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina. “People had a lot of confidence coming into this year that the economy was accelerating, and the recent set of economic statistics have thrown that into question.”

Jobs Data

The private ADP report precedes the Labor Department’s payrolls data on Feb. 7. Payrolls rose 74,000 in December, missing the median analyst projection for an increase of 197,000. The Institute for Supply Management’s non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a survey called for a reading of 53.7. Estimates ranged from 52 to 55. Not including today’s numbers, the index has averaged 53.8 since the recession ended in June 2009.

The S&P 500 is down more than 5 percent in 2014 and the Dow Jones Industrial Average has fallen almost 7 percent. Benchmark indexes rebounded yesterday after the S&P 500 slid 2.3 percent on Feb. 3 to close at the lowest level since October.

‘Unravel Quickly’

The stock market may “unravel quickly” if the major indexes trade lower this week, Tom DeMark, the chief executive officer of DeMark Analytics LLC, said today in an interview on CNBC. If stocks fall today and open lower and trade lower tomorrow, he said, stocks are likely to continue falling regardless of Friday’s jobs data.

Leon Cooperman, chairman of hedge fund Omega Advisors Inc., dismissed the prediction. The stock market’s decline this year is healthy and the S&P 500 probably will end 2014 higher, he said on Bloomberg Television.

“I say it’s a correction that’s creating some values, which is what we should all be happy about,” Cooperman said on Bloomberg’s “Market Makers” program. “You don’t want to buy stocks at a high, you want to buy stocks when they go down.”

Walt Disney Co. and Nasdaq OMX Group Inc. are among companies reporting earnings today. Almost 78 percent of the S&P 500 companies that have posted results this earnings season beat analysts’ estimates, data compiled by Bloomberg show.

Market Movers

Among stocks moving today, Cognizant Technology Solutions Corp. fell 5.1 percent on a disappointing forecast. 3D Systems Corp. slumped 15 percent after its projection trailed expectations. Wynn Resorts Ltd. and Las Vegas Sands Corp. declined after a report indicated Macau casino revenue growth slowed to the weakest pace since October 2012. Myriad Genetics Inc. rallied 11 percent after boosting its 2014 profit forecast.

Equity volatility declined in Europe, with the VStoxx Index dropping 1.6 percent today. In Asia, the Nikkei Stock Average Volatility Index retreated from the highest level since July. The Chicago Board Options Exchange Volatility Index was little changed today after losing 11 percent yesterday, the most since Dec. 18.

An exchange-traded fund that appreciates as calm is restored to financial markets has never been more popular. About $196 million was added last week to the VelocityShares Daily Inverse VIX Short-Term ETN, which rises in value as swings decline, the most since its debut in November 2010, according to data compiled by Bloomberg.

Commodity Movers

Zinc and aluminum climbed at least 0.7 percent as 19 of 24 commodities tracked by the S&P GSCI Index advanced. Natural gas erased earlier gains to drop 3.6 percent while crude oil increased 0.2 percent.

Zinc rose 0.8 percent after falling 6.6 percent the past 10 days, the longest streak since at least 1989. Lead jumped 0.9 percent.

Greek bonds gained after two officials with knowledge of discussions being held by European authorities said the next handout to the country may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid.

Trading volumes in the Stoxx 600 were 9 percent greater than the 30-day average, data compiled by Bloomberg show. The gauge fell 1.8 percent in the three days through yesterday.

Swatch Group AG climbed 3.9 percent, the most in a year, after the biggest maker of Swiss watches posted full-year profit that beat analysts’ projections. RSA Insurance Group Plc gained 4.7 percent after brokerages from Barclays Plc to Raymond James Financial Inc. upgraded their ratings on the U.K. insurer following the appointment of former Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester.

Panasonic Jumps

Hargreaves Lansdown Plc, the U.K.’s biggest retail broker, fell 10 percent after its operating-profit margin declined. Konecranes Oyj, a Finnish maker of lifting equipment, lost 4.4 percent after its order book fell to an almost three-year low.

Panasonic Corp. jumped the most since at least 1974, climbing 19 percent after Japan’s biggest maker of consumer electronics posted third-quarter profit that was 68 percent higher than the average estimate in a Bloomberg survey of analysts.

Emerging Markets

The MSCI Emerging Markets Index slipped 0.1 percent. The gauge has fallen 8.6 percent this year. Russia’s Micex advanced 1 percent, rebounding from the lowest level since Dec. 5, and South Korea’s Kospi gained 0.2 percent, rallying from a five- month low. Taiwan’s Taiex slid the most in 10 months, dropping 2.3 percent, as trading resumed following the Lunar New Year holiday.

The 10-year Spanish yield fell four basis points to 3.72 percent. The rate on similar-maturity Italian securities declined two basis points to 3.76 percent. Portugal’s 10-year yield dropped six basis points to 4.99 percent.

The yen gained 0.2 percent to 101.43 per dollar, having touched 100.76 yesterday, the strongest level since Nov. 21. Japan’s currency appreciated 0.2 percent to 137.19 per euro.

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