The dollar sank the most in seven years against major currencies as data indicating a slowdown in service industry growth fueled concern over the strength of the U.S. economy. American stocks staged an afternoon rally, erasing earlier losses as crude oil rebounded.
The Bloomberg Dollar Spot Index sank as much as 1.9% as a gauge of U.S. services showed expansion had slackened to the weakest pace in nearly two years. The Dow Jones Industrial Average jumped more than 180 points, recouping some of Tuesday's slump as Exxon Mobil Corp. led a rally among energy producers. U.S. crude surged more than 8%, swinging back to gains following its biggest two-day plunge in seven years. The jump in commodities saw Brazil's Ibovespa rise the most among major indexes.
While data showing U.S. companies hired more than 200,000 workers in January provided a fresh sign that the labor market continued to power past slowing growth, the services miss sparked concern that the largest part of the American economy isn't immune to weakness elsewhere. China's slowdown and crude's rout have dragged down growth in oil-exporting nations, fueled speculation of defaults by commodity producers and battered earnings at corporate giants.
“Investors are a little bit risk-averse after the start of the year with a really bad month in January and that's still in people's minds, wondering if we are going to move down further,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by phone. “Banks are getting beat up with a flattish yield curve and it's hard to have a rally if you don't have financials and the energy sector participating.”
“Movements in WTI and broader U.S. indices remain very correlated and much of the move might simply be due to strength in WTI right now,” said Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management Inc., which oversees $280 billion. “We remain in a volatile environment, and today's reasons for strength could easily be tomorrow's reasons for weakness. It's misleading in some senses - outside of the Dow we're looking at a modestly mixed market.”
While data showing U.S. companies hired more than 200,000 workers in January provided a fresh sign that the labor market continues to power ahead, the services miss sparked concern that the largest part of the American economy isn't immune to weakness elsewhere. The data tipped the fixed-income market's balance toward zero rate hikes by the
Federal Reserve this year, amid prospects central banks from Asia to Europe will act to quell the turmoil that's roiled markets in 2016. The dollar's drop underpinned oil's surge, along with speculation OPEC and other oil producing nations have agreed to meet.
Stocks
The Standard & Poor's 500 Index rose 0.5% to 1,912.53 as of 4 p.m. in New York, while gains in Exxon and Chevron Corp. pushed the Dow higher. The broader index is looking for its first gain in February following a 5.1% drop last month that delivered the weakest start to a year since 2009.
“This is an emotional, sentiment-driven market and it's likely to remain tied to oil,” Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said by phone.
The Stoxx Europe 600 Index fell 1.5% as declines in banks dragged stocks lower for a third day. A gauge of lenders posted the worst performance, extending its lowest level since 2012. The Ibovespa led gains among the world's stock markets Wednesday as a rebound in commodity prices spurred a rally in Vale SA and helped lift Brazil's real.
