A pedestrian is reflected in an electronic stock board outside a securities firm in Tokyo, Japan (Photographer: Tomohiro Ohsumi/Bloomberg)

U.S. Stocks' Afternoon Rally Sputters Out Late: Markets Wrap

(Bloomberg) -- U.S. stocks rallied back from a four-week low, with major averages bouncing off of key technical levels, but still ended down for the second straight day.

The S&P 500 recovered more than 1 percent from session lows, buoyed by tech shares. The rebound came after the gauge slumped through its 200-day moving average, a level that has provided downside support five times since February. The rally was hampered by falling Treasury yields, which weighed on financial firms.

Investors are still digesting the Federal Reserve’s latest decision and await Friday’s monthly jobs report for clues on the strength of the world’s largest economy.

“What we’re faced with here is a continuation of a strong economy, strong earnings and inflation creep that’s spooking the market on the fixed income side overall the last several months,” Chad Morganlander, a portfolio manager at Washington Crossing Advisors, said by phone. “Now, that to me is the thematic that’s going to play out not only today but going into the jobs number.”

Materials shares gained as trade talks between the U.S. and China got underway Thursday, but both sides dialed back expectations. Beijing won’t agree to preconditions that include abandoning its advanced manufacturing program and agreeing to cut the trade gap by a fixed amount, a Chinese official said. American delegates said earlier that a breakthrough is unlikely, and they might leave early if unsatisfied. Talks are expected to resume on Friday.

Investors are also weighing the meaning of the latest Fed gathering. The U.S. central bank kept rates on hold as expected on Wednesday, admitting inflation is near target without suggesting any need to accelerate its gradual hiking path.

More data points are rolling in: The U.S. trade deficit narrowed in March by the most in two years, while last week’s unemployment filings were below estimates and productivity gains remained lukewarm in the first quarter. Growth in U.S. service industries cooled in April to a four-month low and hiring eased, adding to signs the economy is off to a softer start this quarter, an Institute for Supply Management survey showed Thursday.

European equities retreated following their rally a day earlier. In Asia, Hong Kong stocks underperformed just as Chinese smartphone maker Xiaomi Corp. filed for what’s expected to be the world’s biggest IPO since 2014.

West Texas oil gained as traders weighed a rise in stockpiles against concern about U.S. sanctions on Iran. Gold advanced.

Terminal users can read more in our markets live blog.

Some key events coming up during the remainder of this week:

  • The European Commission will present its spring economic forecasts, including growth, inflation, debt and deficit projections.
  • Payroll gains in the U.S. probably picked up in April, with the unemployment rate forecast to drop to 4 percent, according to surveys of economists before the data reports due Friday.
  • Earnings season continues, with Alibaba and HSBC Holdings Plc on Friday.
  • Reserve Bank of Australia releases its quarterly update of growth and inflation forecasts on Friday.
  • Berkshire Hathaway holds its annual shareholders meeting in Omaha, Nebraska on Saturday.

And these are the main moves in markets:

Stocks

  • S&P 500 Index fell 0.2 percent as of 4:02 p.m. New York time, to the lowest in more than a week.
  • The Stoxx Europe 600 Index declined 0.7 percent, the largest drop in a week.
  • The U.K.’s FTSE 100 Index declined 0.5 percent, the first retreat in more than a week.
  • Germany’s DAX Index sank 0.9 percent.
  • The MSCI Emerging Market Index decreased 0.9 percent to its lowest in a week.

Currencies

  • The Bloomberg Dollar Spot Index sank 0.3 percent.
  • The euro climbed 0.3 percent to $1.1983.
  • The British pound declined less than 0.05 percent to $1.357.
  • The Japanese yen jumped 0.6 percent to 109.20 per dollar, the largest climb in almost six weeks.

Bonds

  • The yield on 10-year Treasuries decreased two basis points to 2.95 percent, the lowest in almost two weeks.
  • Germany’s 10-year yield fell five basis points to 0.53 percent.
  • Britain’s 10-year yield declined seven basis points to 1.39 percent.

Commodities

  • West Texas Intermediate crude increased 0.8 percent to $68.46 a barrel.
  • Gold jumped 0.5 percent to $1,311.78 an ounce.
  • LME copper advanced 0.1 percent to $6,827 a metric ton.

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