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Stocks fall as Nasdaq tumbles; treasuries rally on jobs report

By Joseph Ciolli and Callie Bost
Bloomberg News

U.S. stocks tumbled, with the Nasdaq Composite Index falling the most in two months, as investors continued a selloff of the bull market’s biggest winners. Treasuries rallied as jobs data boosted speculation the Federal Reserve will remain accommodative on rates.

The Nasdaq Composite dropped 2.4 percent at 3:38 p.m. in New York as technology shares slumped. The Standard & Poor’s 500 Index fell 1.1 percent after rallying as much as 0.5 percent to a record earlier in the day. The yield on five-year Treasury notes dropped nine basis points to 1.71 percent. The Stoxx Europe 600 Index rose 0.6 percent, advancing for a ninth day. The dollar slid for the first time in seven days against the yen. Gold jumped 1.5 percent.

Employers hired more workers last month and the unemployment rate held at 6.7 percent, Labor Department figures showed today. Europe’s central bank signaled yesterday it may use quantitative easing to ward off deflation. The value of global stocks rose to a record $63.2 trillion this week as Fed Chair Janet Yellen said accommodative policies will be needed for “some time.”

“There’s a little bit of nervousness about some of the high multiples in the biotech area and computer and Internet- related stocks,” John Carey, a fund manager at Pioneer Investment Management Inc., a Boston-based firm that manages about $220 billion worldwide, said in a phone interview. “You’re having another wave of selling in that very high- momentum group.”

The S&P 500 erased gains after climbing to a record 1,897.28 earlier in the day. The gauge trimmed its advance for the week to 0.5 percent, and is up 1.1 percent for the year. The gauge trades at 17.2 times reported earnings, the highest level since 2010 and 11 percent above its five-year average, according to data compiled by Bloomberg.

Dow Record

The Dow Jones Industrial Average touched an intraday record of 16,631.63, briefly erasing losses for the year, before retreating. It has gained 0.7 percent this week.

Large technology stocks from Google Inc. to Yahoo Inc. plunged as investors resumed a selloff of the bull market’s biggest winners. Google Class A shares sank 4.1 percent. Facebook Inc. lost 4.4 percent, bringing its two-day slide to 9.3 percent. Yahoo declined 4.3 percent to the lowest since November.

“This has been in the making for a few weeks,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said a phone interview. “Managers were positioned very heavily last year with the winners. They killed in 2013 and money started to pour in them. Today is kind of like the panic day that they couldn’t stand it any more and now they’re just puking these names.”

The Nasdaq Composite index has fallen 0.3 percent in the past five days after losing 2.8 percent last week. The gauge is down 0.8 percent in 2014. It rose 38 percent last year.

Nasdaq 100

Isolated lurches in the Nasdaq 100 have become more common in the last two months as investors reassessed equities that have posted annual gains of 25 percent since 2009. The gauge twice tumbled more than 1.8 percent over two-day stretches last week and lost 2.1 percent on March 13 and 14.

All but nine of the 121 stocks in the Nasdaq Biotechnology Index dropped. The gauge plunged 7 percent last week after rallying 79 percent in the 12 months through Feb. 28. Netflix Inc. sank 4.5 percent for a third straight decline. The stock nearly quadrupled in 2013.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as VIX, rose 5.7 percent to 14.13.

Jobs Report

Five- and seven-year notes led gains among Treasuries after the government’s March jobs report.

Payrolls rose 192,000 last month after a 197,000 gain in February that was larger than first estimated, the Labor Department reported today in Washington. The median forecast in a Bloomberg survey projected a 200,000 gain. Private employment, which excludes government jobs, surpassed the pre-recession peak for the first time.

Employment in January and February was revised higher, showing the effect on the labor market from inclement winter weather was less severe than previously thought.

“We like this number because it is not too high,” David Roda, the Miami-based regional chief investment officer for Wells Fargo Private Bank, said in a phone interview. His firm manages $170 billion. “If this number were too big and unemployment was declining faster than expected, we would have anticipated faster Fed moves, partially in short-term rates.’

Interest Rates

U.S. debt had declined this week on speculation the central bank would further cut its debt-purchase stimulus and raise interest rates next year. The Fed has reduced its monthly bond purchases to $55 billion, citing an improving economy. Yellen signaled during a press conference last month that a rate increase may come six month after the central bank completes its bond buying.

The Fed uses the jobs report to help determine the timing and pace of further cuts to its monthly bond-buying program. The central bank also looks to the unemployment rate as a factor in deciding when to raise its benchmark interest rate.

Pacific Investment Management Co.’s Bill Gross said the pace of employment growth in the U.S. means the Federal Reserve will continue to wind down bond purchases and then consider raising interest rates.

Six Months

”Two-hundred thousand jobs plus or minus is probably reflective of 2.5 percent growth in the short term,” said Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Michael McKee. The Fed’s quantitative easing should “end at the end of October or November. Then, as Janet Yellen has suggested, six months plus or minus, we can begin to talk about higher policy rates.”

Yields on 10-year Treasuries dropped seven basis points to 2.73 percent. The rate on seven-year notes lost 10 points to 2.30 percent.

The Stoxx 600 rallied to the highest level since 2008. Almost three shares advanced for every one that declined, with trading volumes 8.7 percent lower than the 30-day average, according to data compiled by Bloomberg. The gauge increased 1.6 percent this week, a third straight weekly gain.

European Bonds

European bond yields from Ireland to Italy fell to records on speculation that inflation at a four-year low will push the European Central Bank to expand stimulus measures. President Mario Draghi said yesterday officials have discussed further options, including asset purchases, or quantitative easing.

Italy’s 10-year yield tumbled as much as 11 basis points to 3.15 percent, dropping below the previous record of 3.196 percent set in 2005. The yield on Spain’s two-year note declined as much as six basis points to a record-low 0.59 percent. Ireland’s 10-year yield dropped to 2.91 percent, the least on record.

The Bloomberg U.S. Dollar Index, which tracks the performance of a basket of 10 leading global currencies against the dollar, slipped 0.3 percent, snapping a three-day rally.

The U.S. currency fell 0.6 percent to 103.29 yen, trimming a third weekly gain to 0.5 percent. The dollar rose 0.1 percent to $1.3706 per euro after climbing to $1.3673, the strongest since Feb. 27. It is set for a third weekly advance, the longest since the period ended July 5. The euro weakened 0.7 percent to 141.56 yen today.

Commodities Gain

The S&P GSCI gauge of 24 commodities climbed 0.3 percent. Gold jumped 1.5 percent, the most in three weeks, after the jobs report triggered concern the economy may not be expanding as fast as forecast, boosting demand for bullion as a store of value.

West Texas Intermediate oil surged 0.9 percent to $101.15 a barrel, trimming a weekly decline to 0.5 percent.

The MSCI Emerging Markets Index added 0.2 percent, extending its third weekly gain to 1.7 percent.

The Shanghai Composite Index rose 0.7 percent as benchmark money-market rates declined. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.2 percent.

--With assistance from Emma O’Brien in Wellington, Stephen Kirkland, Cecile Vannucci, Claudia Carpenter, Paul Dobson and Jennifer Joan Lee in London, Adam Haigh in Sydney, Nick Gentle in Hong Kong and Liz Capo McCormick in New York.


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