Sun, Jun 05, 2016 - Page 15 News List

US stocks pare their losses, boosted by commodities

Bloomberg

US stocks pared losses as the US dollar fell, while US Treasuries and gold gained after US employers last month added the fewest jobs in almost six years, bolstering the case for the US Federal Reserve to leave interests rates lower for longer.

Shares of commodity producers extended gains, helping the S&P 500 trim declines. The dollar tumbled the most in six months versus the euro, while investors sought the safest government securities, sending the yield on two-year Treasuries to the steepest drop since September last year and the yield on German 10-year bunds to a record low. The weak greenback sparked a rally in emerging-market assets and commodities.

“Things are never as bad or as good as they seem,” said Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ US intermediary business, which oversees US$2 trillion. “Fed futures are pricing in a decreasing probability for June and stocks probably don’t mind that scenario all that much. We’re moving away from this risk-on, risk-off formula to one that’s more Fed on, Fed off.”

The addition of 38,000 jobs last month was less than the most pessimistic of forecasts in a Bloomberg survey, throwing cold water on equity gains that took the S&P 500 within 1.2 percent of its all-time high.

Smaller employment gains reduce the odds of a more pronounced upturn in economic growth at a time when corporate profits are on a downswing and global markets remain weak. The odds for a Fed rate increase next month fell to 27 percent, down from 55 percent a day earlier.

The S&P 500 fell 0.2 percent to 2,100.38 at 3:19pm in New York, after dropping as much as 1 percent. The benchmark reversed a weekly retreat, now set for a 0.1 percent advance, the third week of gains.

Utilities and telephone stocks advanced as the prospect for lower rates sent investors searching for shares that have large payout ratios. Raw-material shares also climbed after fluctuating earlier.

Newmont Mining Corp jumped 9 percent for the biggest gain in the S&P 500.

Financial shares trimmed losses to 1.3 percent, after falling as much as 2.4 percent. JPMorgan Chase & Co and Goldman Sachs Group Inc sank at least 1.7 percent. Insurers MetLife Inc and Prudential Financial Inc fell more than 3 percent.

The two-year Treasury note yield fell to 0.78 percent, while 10-year yields dropped 10 basis points to 1.7 percent.

The gap between yields on five and 30-year debt, a measure of the yield curve, steepened by the most since March.

“This was quite shocking — it’s way under expectations,” said Christopher Sullivan, who oversees US$2.3 billion as chief investment officer at United Nations Federal Credit Union in New York.

The Fed “will postpone a nearby rate hike for sure — maybe they’ll be forced to look beyond the summer,” Sullivan added.

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