U.S. Stocks Decline as Oil Resumes Selloff; Bonds Fall
Dec 15, 2014 12:13 PM GMT-0430
The Standard & Poor’s 500 Index lost 0.9 percent at 11:42 a.m. in New York, after falling last week by the most in more than two years. The Dow average dropped 137.56 points, or 0.8 percent. The Stoxx Europe 600 Index sank 2.2 percent, leaving the gauge lower by 1.5 percent this year. The MSCI Emerging Markets Index dropped to a 10-month low. The ruble weakened through 60 per dollar for the first time, while Turkey’s lira fell to a record versus the dollar. U.S. crude sank 2.3 percent to $56.49 a barrel.
Benchmark oil prices resumed selloffs that accelerated last week when more than $1.8 trillion was erased from the value of global equities. Lower oil is pushing Russia’s economy closer to recession, while investors continued selling shares in energy producers in Europe, Canada and the U.S. Federal Reserve policy makers meet this week to review their stance on the timeframe for an interest-rate increase.
“People are going to come into these markets looking at the same things they did last week, oil and secondary interest rates,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone from Austin, Texas. “To me, the oil selloff is a bit overdone and people’s reactions are a bit negative to it. We need to see stability in oil that lasts a couple of days. If we get that, people will stop being concerned.”
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Crude Selloff
Selling in U.S. and European equities accelerated after police stormed a cafe in Sydney where a gunman had been holding hostages. Stocks recouped some of their decline when Australian police said the siege had ended.The S&P 500 sank 3.5 percent last week to a six-week low, and is trading today near its average price for the past 50 days. It slid below 2,000 points for the first time since October. The Chicago Board Options Exchange Volatility Index, also known as the VIX, jumped 78 percent last week, its biggest advance in more than four years. The VIX fluctuated today.
Brent futures for January settlement lost 0.4 percent to $61.59 a barrel in London, erasing gains on news that fighting shut down two ports in Libya. Brent earlier slumped 2.5 percent to $60.28, the lowest since July 2009, after the United Arab Emirates said the Organization of Petroleum Exporting Countries will refrain from cutting output even if prices slumped to $40 a barrel.
Oil and gas companies in the Stoxx 600 plunged 3.1 percent, leaving them 32 percent below a June high. Energy stocks in the S&P 500 slid 0.4 percent today, extending an 8.1 percent slide last week.
“A month ago lower oil was good, then it became bad and lately we’ve been trading tick for tick with crude,” Matt Maley, an equity strategist for Miller Tabak & Co. in Newton, Massachusetts, said by phone. “When crude rolled over this morning, we rolled over. People are worried about all of the losses we’ve seen.”
Among other U.S. stocks moving today, PetSmart Inc. rose 4.5 percent after a group led by BC Partners agreed to buy it for $8.3 billion. Emerson Electric Co. gained 1.7 percent after selling a power-transmissions business to Regal-Beloit Corp. for $1.4 billion.
Europe Equities
The Stoxx 600 reversed an after earlier gain as much as 0.8 percent. The index tumbled 5.8 percent last week, the most since September 2011, as oil prices slumped and Greek shares posted their biggest declines since 1987.U.S. 10-year note yields rose three basis points, or 0.03 percentage point, to 2.11 percent after ending last week at the lowest close since June 2013.
Fed officials will consider whether to retain a pledge to keep rates low for a “considerable time” after they ended monthly bond-buying in October. Fed Chair Janet Yellen and her fellow policy makers will gather in Washington tomorrow for their final two-day meeting of the year.
“The Fed takes precedent,” said Michael Franzese, senior vice president of fixed-income trading at ED&F Man Capital Markets in New York. The central bank may “leave considerable time in there and tell you that it could be removed in the next couple of meetings, and that they will begin the process of raising rates in May or June.”
Bond Yields
Treasuries returned 6.5 percent through Dec. 12, compared with a 9.7 percent gain from German securities, according to Bloomberg World Bond Indexes. Italian bonds earned 14 percent and Spanish debt gained 15 percent.Spanish securities rallied today, pushing the 10-year yield nine basis points lower to 1.79 percent.
The euro weakened 0.3 percent to $1.2422 and declined 0.7 percent to 146.99 yen.
The MSCI Emerging Markets Index dropped 1.5 percent for a seventh day of declines, the longest stretch since mid-September. Thailand’s benchmark stock index slid as much as 9.2 percent, the most in six years on a closing basis, before trading 2.4 percent lower.
Ruble Weakens
Russia’s ruble weakened 3.4 percent versus the dollar to 60.15, taking its six-day depreciation to about 15 percent. The Micex Index (INDEXCF) fell 0.7 percent. The Bank of Russia is holding an auction of local currency to ease a cash squeeze.Indonesia’s rupiah tumbled 1.9 percent to 12,698 per dollar, the biggest drop since Aug. 1 and the weakest level on a closing basis since August 1998. The currency is suffering amid speculation local companies are buying dollars before year-end and as foreign funds pull money from the country.
Equities in Turkey retreated 0.5 percent and the lira weakened as police detained the editor-in-chief of the country’s best-selling daily and the head of a television station. The nation’s jobless late rose to 10.5 percent in September from 10.1 percent the previous month, data showed today.
The MSCI All-Country World Index lost 0.3 percent today, down for a sixth day, the longest streak in two months. The gauge is heading for its lowest close since Oct. 23.
Danske Bank A/S dropped 1.8 percent after Denmark’s biggest bank said it will write down 9 billion kroner ($1.5 billion) in goodwill.
U.S. natural gas futures climbed 1.5 percent to $3.85 per million British thermal units, and reached the highest in almost two weeks, amid forecasts for colder weather in late December. Gold fell 1.1 percent, declining for a second day. Silver slid 1.3 percent and platinum dropped 1 percent.
