Treasuries Decline as U.S. Stocks Retreat, Silver Gains

Treasuries fell, sending 10-year yields up from almost a three-month low, and U.S. stocks ended lower as investors dissected reports showing growth in jobs and acceleration in service industries. Silver and gold paced gains in commodities.

Ten-year yields increased four basis points to 2.67 percent while the S&P 500 slipped 0.2 percent to 1,751.64 at 4 p.m. in New York, trimming an earlier loss of as much as 1 percent. The Stoxx Europe 600 Index increased 0.1 percent and the MSCI Asia Pacific Index advanced 0.7 percent. The S&P GSCI Index of 24 raw materials rose 0.1 percent as coffee jumped 5 percent on supply concerns and silver climbed more than 2 percent. Greek 10-year yields declined 29 basis points on speculation bailout terms will be eased. Japan’s currency rose against 13 of its 16 major counterparts.

Companies in the U.S. boosted payrolls by 175,000 in January, according to a report from ADP Research Institute two days before the government’s monthly jobs data. About $3 trillion has been erased from equities worldwide this year amid a selloff in emerging-market currencies as China’s economy slows and the Federal Reserve cuts stimulus. The improving U.S. economy may warrant faster tapering of quantitative easing, Philadelphia Fed President Charles Plosser said today.

“The data is pretty encouraging; that’s obviously a good thing for the economy as a whole,” Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of 21 primary dealers that trade with the Fed, said of the ISM report. The market is “looking to Friday for direction.”

Jobs Data

The private ADP report precedes the Labor Department’s payrolls data on Feb. 7. Payrolls rose 74,000 in December, missing the median analyst projection for an increase of 197,000. The Institute for Supply Management’s non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a survey called for a reading of 53.7. Estimates ranged from 52 to 55. Not including today’s numbers, the index has averaged 53.8 since the recession ended in June 2009.

Plosser, who votes on policy this year, said he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank.

Policy makers made the first two cuts to asset purchases in December and January, slowing to $65 billion a month from $85 billion. While welcoming the trims, Plosser said they “may prove to be insufficient” if growth keeps accelerating.

The S&P 500 is down more than 5.2 percent in 2014 and the Dow Jones Industrial Average has fallen 6.8 percent. Benchmark indexes rebounded yesterday after the S&P 500 slid 2.3 percent on Feb. 3 to close at the lowest level since October.

(Source:  Bloomberg)