Dollar, stocks fall on revived growth worries
Crude oil slipped under $50 a barrel as Brent, the global benchmark, posted a seventh straight weekly loss. Gold rose and notched its first weekly gain in four weeks as political uncertainty in Greece boosted demand for safe-haven assets.
Also weighing on investors was a Reuters report that raised concerns that prospective European Central Bank bond-buying may fall short of the unlimited money-printing program investors have expected.
“The news out of the ECB this morning, this leaking out about what the program may look like, people are disappointed because they don’t think it is big enough, so that is causing some pullback,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.
Investors are still concerned about the impact of lower oil prices and how that might expose certain trades in the financial markets, said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“Somebody’s going to cry ‘uncle,’ we just don’t know who it is yet,” he said.
Data from Germany highlighted weakness in the euro zone, which is still struggling to emerge from the region’s long-simmering economic crisis. German exports fell sharply in November and industrial output also declined.
U.S. job growth increased briskly in December and the jobless rate dropped to a 6-1/2-year low. But wages slipped from November, buttressing the case for the Federal Reserve not to rush to raise interest rates.
The 5-cent drop in average hourly earnings, which nearly erased gains seen in November, took some shine off an otherwise mostly upbeat labor report, economists said.
Markets are caught between stock and bond investors over-reacting to economic data and global events, pushing U.S. equities to new highs and bond yields to record lows, said David Kelly, chief global strategist for JPMorgan Funds in New York.
“The only thing that is more bizarre than a lack of wage growth right now is the fact that, in an economy that is growing as rapidly as this one, is that you can have a 2 percent Treasury. That makes no sense at all,” Kelly said.
MSCI’s all-country world stock index .MIWD00000PUS, a measure of equity markets in 45 countries, fell 0.47 percent. The pan-European FTSEurofirst 300 index .FTEU3 of leading regional companies closed down 1.45 percent at 1,348.58.
On Wall Street, the Dow Jones industrial average .DJI closed down 170.5 points, or 0.95 percent, at 17,737.37. The S&P 500 .SPX fell 17.33 points, or 0.84 percent, to 2,044.81, and the Nasdaq Composite .IXIC lost 32.12 points, or 0.68 percent, to 4,704.07.
For the week, both the Dow and Nasdaq fell 0.5 percent, while the S&P slipped 0.6 percent.
Brent LCOc1 settled down 85 cents at $50.11 a barrel, after earlier falling as low as $48.90.
U.S. crude CLc1 settled down 43 cents at $48.36 a barrel.
U.S. Treasury debt prices rose on the view that rates are on hold. Perceived odds on the Fed raising rates by September fell to 52 percent, according to CME Fed watch, which tracks futures contracts. That was down from 60 percent before the jobs data.
The benchmark 10-year note US10YT=RR traded up 16/32 in price to yield 1.9605 percent, according to Reuters data.
Government bond yields in the euro zone were just above record lows. About a quarter of the euro zone bond market now yields less than 10 basis points, while German bonds with maturities of up to five years are yielding zero or less.
Yields on 10-year Bunds DE10YT=TWEB, which set the standard for the bloc’s borrowing costs, fell to 0.488 percent.
U.S. gold futures for February delivery GCcv1 rose 0.6 percent to settle at $1,216.10 an ounce.
Copper prices slipped to 4-1/2-year lows on concerns about oversupply after inventories climbed and worries about global growth, especially in top metals consumer China. (REUTERS)