(Bloomberg) -- The Standard & Poor’s 500 Index fell, erasing a gain for the year, while Treasuries and the yen advanced on demand for haven assets as tension persisted in Ukraine. Copper declined as data from China missed estimates and gold reversed losses.
The S&P 500 lost 1.2% at 4 p.m. in New York after earlier rising to within four points of a record. The Dow Jones Industrial Average fell 230 points. Yields on 10-year Treasuries slid nine basis points to 2.64%. Russian stocks dropped to the lowest since May 2010. Copper traded near a 44-month low and gold rose 0.1%. The yen rallied 1.1 % to 101.66 per dollar.
“Ongoing concerns about China’s growth and the fluid situation in Ukraine continue to linger on markets,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said. “As Kerry meets with his Russian counterpart tomorrow in a last ditch effort to divert the referendum, markets could be a little jittery, and we might be seeing some of that play out today as well.”
Secretary of State John Kerry warned there could be “very serious” steps from Europe and the U.S. if there is no sign of resolution between Ukraine and Russia as the Crimea region prepares to vote this weekend on a separatist resolution. China’s industrial output, investment and retail-sales growth cooled more than estimated in January and February.
The global concerns overshadowed U.S. data indicating an improving American economy. Retail sales rose in February for the first time in three months, and jobless claims unexpectedly fell last week to the lowest level since November, data showed.
Equity Valuations
The S&P 500 closed yesterday 0.5% away from a record reached on March 7. The gauge has fallen 1.7% this week and trades at the lowest since March 3. It has retreated 0.1% in 2014 after rallying 30% last year.
U.S. stocks are falling at the five-year anniversary of a bull market that sent the S&P 500 up 176% through yesterday, pushing its price-earnings ratio to 17, approaching the level where equities peaked in 2008.
The advance is about a week away from supplanting the stretch of equity gains that lasted from 1982 to 1987 to become the fifth longest of all time, according to Bespoke Investment Group LLC.
It’s also three weeks before the end of the first quarter, a period for which Wall Street analysts have lowered forecasts for U.S. earnings growth to 1.9% from 6.6% at the start of 2014, according to data compiled by Bloomberg. For all of 2014, analysts see profits climbing 7.6%, compared with an estimate of 9.7% at the end of December.
Volatility Gauge
The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, rose 11% to 16.08 today. The measure has advanced 17% this year.
“The U.S. data was quite good, but the market doesn’t want to acknowledge that today,” Lillian Seidman, an options strategist at Miller Tabak & Co. in New York, said in an interview. “There’s China concern and Ukraine is not helping. Overall there are many factors to force out sellers right now.”
Russia’s Micex Index slid 2% to the lowest since May 2010. Stocks have tumbled as President Vladimir Putin tightened his grip on Ukraine’s Crimea in the face of sanctions from the West.
Kerry told a Senate panel in Washington today that “nobody doubts” Crimea will vote to leave Ukraine. He spoke to Russian Foreign Minister Sergei Lavrov by phone today and will meet him face-to-face in London tomorrow. German Chancellor Angela Merkel said Russia is risking “massive” political and economic damage.
Emerging Markets
Goldman Sachs Group Inc. cut its forecast for Russia’s economic growth this year to 1% from 3% earlier, citing the Ukraine crisis, lower investment and capital outflows.
The iShares MSCI Emerging Markets Index exchange-traded fund lost 1.8% to the lowest level since Feb. 5.
Brazil’s Ibovespa index fell 0.9%, extending a decline from its Oct. 22 peak to 19.5% on concern that Brazil’s credit rating will be cut. Central bank President Alexandre Tombini and directors will meet today with S&P analysts.
The S&P GSCI index of 24 commodities lost 0.3%, with natural gas declining 2.4% to pace losses. Wheat futures fell from a four-month high on signs that demand ebbed for exports from the U.S., the world’s biggest shipper.
Copper Drop
Copper fell for the third time this week on growing signs of slower demand by the world’s top user. Copper for delivery in May slid 1.3% to $2.923 a pound in New York. Prices touched the lowest levels since 2010 yesterday.
China accounts for as much as 45% of global copper demand, according to Barclays Plc.
In the U.S., nine of the 10 main S&P 500 groups retreated today. Technology and industrial stocks led declines, falling at least 1.5%. United Technologies Corp. slid 2.5% and Pfizer Inc. lost 2.7% for the steepest declines in the Dow average.
“The negative data points coming from China have taken people’s bullishness down a few levels,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “You’re seeing traders who were probably overextended on the long side toward the end of last week continue to reduce positions.”
Retail Sales
Americans ventured out to shop last month even as colder- than-normal temperatures and severe snowstorms blanketed parts of the U.S., showing the economic expansion is regaining momentum. The economic reports added to speculation the Federal Reserve will cut back on its bond purchases at its meeting next week. The Fed is trying to determine how much recent economic data has been affected by weather.
“The lingering question has been how disruptive this deep freeze has been to the economy,” James Dunigan, who helps oversee $127 billion as chief investment officer in Philadelphia at PNC Wealth Management, said by phone. “As we come out of this deep thaw, if we get some better, more clear data on the underlying trend, we’re going to see that the economy is continuing to gain momentum.”
Treasury yields rose as high as 2.75% after the U.S. data was released before reversing. Economists and strategists in a Bloomberg News survey cut their forecasts for the 10-year yield at year-end. The yield will rise to 3.35% in the fourth quarter, according to survey dated March 7 to 12.
Deflation Risks
The euro fell 0.3% to $1.3859, reversing earlier gains, as the European Central Bank signaled it’s monitoring advances in the currency for deflation risks. ECB President Mario Draghi said its level is “increasingly relevant in our assessment of price stability.” It earlier approached $1.40, the highest in more than two years.
The Stoxx Europe 600 Index extended a one-month low after falling 1%. Retailers lost the most among 19 industry groups. Wm Morrison Supermarkets Plc plunged the most in 11 years after the smallest of the U.K.’s four main grocers forecast a profit decline and said it will sell property.
Adecco SA sank 6.6% after its largest investor said it will sell about 16% in the world’s biggest provider of temporary workers.
