Stocks, Dollar Drop, Treasuries Gain on Jobs, Purchasing Data

By Michael P. Regan

March 31 (Bloomberg) -- Stocks and the dollar fell while Treasuries advanced as reports showed American employers unexpectedly cut jobs and growth in business activity trailed estimates. Gold rose and oil rallied to a 17-month high.

The Standard & Poor’s 500 Index dropped 0.3 percent at 4:14 a.m. in New York, trimming a fourth-straight quarterly advance. The Stoxx Europe 600 Index lost 0.1 percent. The yield on the 10-year Treasury note fell 3 basis points to 3.83 percent. Gold for June delivery rallied 0.8 percent to $1,114.50 an ounce, while the Dollar Index slipped 0.5 percent to 81.069. The Swiss franc rallied as the nation’s leading economic indicators climbed to the highest since November 2007.

U.S. companies cut an estimated 23,000 jobs this month, ADP Employer Services said, compared with a median economist estimate for an increase of 40,000 in a Bloomberg News survey. The data spurred concern economists are too optimistic about the rebound in employment two days before a Labor Department report forecast to show the biggest growth in jobs in three years.

“The ADP report caused jitters,” said E. William Stone, who oversees $102 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “Our view is that the recovery is sustainable, but I don’t think you can officially call it right now. When you get a question out there about the future recovery, you’re going to see market jitters.”

The S&P 500 trimmed gains on the final day of the quarter. The benchmark index climbed 4.9 percent since Dec. 31, its best first-quarter rally since 1998. The index fell to its low of the session today after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February, trailing the median economist estimates of 61.

Dow Retreats From High

Cisco Systems Inc., Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average down from an 18-month high. Ford Motor Co. slid 5.4 percent on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy producers higher as oil topped $83 a barrel and President Barack Obama said he will allow drilling off the East Coast.

A benchmark indicator of U.S. corporate credit risk rose after the ADP report. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 1.9 basis point to a mid-price of 88.2 basis points as of 3:10 p.m. in New York, according to Markit Group Ltd. The index, which typically increases as investor confidence deteriorates and falls as it improves, has dropped 3.3 basis points in March, the second straight monthly decline, Markit and CMA DataVision prices show.

European Stocks

Banks led European shares lower, with BNP Paribas tumbling 2.5 percent in Paris after WestLB AG cut its recommendation on the shares.

Ireland’s benchmark ISEQ Index gained 0.9 percent, trimming a 1.5 percent advance after the U.S. jobs report. The rally came as the National Asset Management Agency announced details of its plan to revive the financial system. Bank of Ireland Plc jumped 24 percent in Dublin after saying it expects to avoid state control by raising most of its 2.7 billion-euro target for capital from private investors.

Irish Banks

The dollar declined against 11 of 16 major currencies, led by a 1.3 percent loss versus the South African rand.

The Swiss franc rose against all 16 major counterparts except the rand, climbing 1.9 percent against the Japanese yen, 1.2 percent versus the U.S. dollar and 0.5 percent against the euro.

The Zurich-based KOF research institute said its monthly aggregate of indicators that aims to predict the economy’s direction about six months ahead increased to 1.93 from a revised 1.9 in February. The franc rose even after Swiss National Bank Governing Board member Jean-Pierre Danthine said the bank will stop “any excessive appreciation.”

The MSCI Asia Pacific Index fell 0.6 percent, the steepest retreat since March 4.

Greek bonds fell, with the yield on the 10-year bond rising 9 basis points to 6.53 percent. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 11 basis points to 344 basis points, the highest since Feb. 25.

The seven-year note, the first security sold by Greece since the European Union and International Monetary crafted a possible aid package last week, extended declines in its second day of trading. The yield climbed to 6.37 percent, from 6 percent when the security was issued on March 29, according to Royal Bank of Scotland Group Plc prices on Bloomberg.

Greece Borrowing Needs

Greece needs to borrow 11.6 billion euros ($15.6 billion) before the end of May after April funding was “taken care of,” Petros Christodoulou, director general of the Public Debt Management Agency, said in a Bloomberg Television interview. Greece plans to sell a global bond in dollars in the next two months.

Moody’s Investors Service downgraded the deposit and debt ratings of five of the nine Moody’s-rated Greek banks due to a weakening in their stand-alone financial strength and anticipated additional pressures stemming from the country’s economic prospects in the foreseeable future.

Precious metals rallied, with gold capping a sixth straight quarterly gain. Platinum advanced 1.4 percent to $1,641.50 an ounce in London and palladium added 1.8 percent to $480 an ounce. Crude oil rose 1.7 percent to $83.76 a barrel in New York trading, the highest settlement since Oct. 9, 2008. A weaker dollar tends to lift prices of dollar-denominated currencies.

Soybeans tumbled the most in three months and corn dropped to the lowest price since October after the U.S. reported larger inventories than analysts expected. Wheat reached a five-month low as planting topped forecasts.

Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more.

To contact the reporter for this story: Michael P. Regan in New York at mregan12@bloomberg.net.

Last Updated: March 31, 2010 16:34 EDT