Friday, May 15, 2009

U.S. Markets Wrap: Stocks, Treasuries Fall; Dollar Gains

U.S. stocks fell, extending the worst weekly loss for the Standard & Poor’s 500 Index since March, as Federal Deposit Insurance Corp. Chairman Sheila Bair predicted the heads of some banks may be replaced and a drop in oil dragged down energy shares. Treasuries fell and the dollar gained.

Zions Bancorporation, Bank of America Corp. and Fifth Third Bancorp led declines in 23 of 24 companies in the KBW Bank Index after Bair said some chief executive officers may need to be fired in the next few months. Chevron Corp. and Exxon Mobil Corp. retreated as oil slid from a six-month high of $60 a barrel. FirstEnergy Corp. fell 9.6 percent, leading utilities lower, after Barclays Plc cut its rating.

“If I had given billions of dollars to banks, I would probably want to have some say in how they’re being run too,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees about $200 billion. “On the other hand, having too much government intervention longer- term could be quite counterproductive to the efficient operation of the market system.”

The S&P 500 slid 1.1 percent to 882.88 at 4:53 p.m. in New York, capping a weekly tumble of 5 percent. The Dow Jones Industrial Average decreased 62.68 points, or 0.8 percent, to 8,268.64.

The dollar gained against most major currencies. Almost three stocks fell for each that rose on the New York Stock Exchange.

‘Contraction is Slowing’

Treasuries fell as reports showed a manufacturing gauge contracted the least since August and U.S. industrial production fell in April at the slowest pace in six months, easing speculation the economic recovery was weakening.

Ten-year notes, whose yields rose for the first time in three days, still posted the first weekly gain in two months, aided by a two-week hiatus in Treasury debt sales and three purchases of government debt by the Federal Reserve. Yields climbed to the highest level since November last week as reports suggested the worst of the global recession may be over.

“The data says contraction is slowing,” said Andrew Richman, who oversees $10 billion in fixed-income assets as a strategist in West Palm Beach, Florida, for SunTrust Bank’s personal-asset management division. “It’s a sign of pre- recovery and it’s negative for Treasuries.”

Dollar Gains

The 10-year note yield rose five basis points, or 0.05 percentage point, to 3.14 percent, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 fell 14/32, or $4.38 per $1,000 face amount, to 99 27/32.

The dollar rose against the euro, gaining for the first week of the last four, as the economy of the 16-nation euro region contracted the most in at least 13 years, raising concern the pace of recovery will be slow. The greenback strengthened against 13 of the 16 most trading currencies, falling only against the Taiwanese dollar, South Korean won and Japanese yen.

The yen extended its weekly rally against counterparts including the South African rand and Norwegian krone as a drop in stocks discouraged investors from buying higher-yielding assets funded in Japan’s currency.

The dollar gained 1.1 percent to $1.3492 per euro, and weakened 0.7 percent to 95.17 yen.

Crude oil fell the most in almost a month on concern the global economic recovery may falter, reducing demand for fuel.

“It’s still about the economy,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “If the bulls are going to reignite their bullish passion, I think we’re going to have to see the stock market carry the load.”

Crude Oil

Crude futures may decline next week as the recession lowers consumption and bolsters U.S. supplies, a Bloomberg News survey of analysts showed. Industrial production in the U.S. fell for a sixth month in April as output at factories, mines and utilities decreased 0.5 percent, according to a report today from the Federal Reserve in Washington.

Crude oil for June delivery fell $2.19, or 3.7 percent, to $56.43 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil reached $60.08 on May 12, the highest intraday price since Nov. 11. Crude is heading for its first weekly decline in four weeks.

Gold prices rose, extending a rally to two weeks, as investment demand increased on rising consumer prices and signs that a rally in U.S. equities may be ending. Silver futures fell. Some investors buy gold as an alternative to shares.

“For gold and silver, we are going into a win-win situation,” Ashraf Laidi, the chief market strategist at CMC Markets in London, said in a Bloomberg Television interview. “When we will have a retreat in the financials and the rest of the stocks, we will have some rotation into metals.”

Gold futures for June delivery advanced $2.90, or 0.3 percent, to $931.30 an ounce on the Comex division of the New York Mercantile Exchange. The price gained 1.8 percent this week, following a 3 percent increase last week.