U.S. Stocks Drop on Concern Over Oil Surge; Gold, Franc Rise By Stephen Kirkland and Whitney Kisling

 Bloomberg - U.S. stocks slid, a day after the biggest rally in three months, as oil rallied to a 29-month high and government data showed American wage growth trailed forecasts. European stocks erased earlier gains.

 The Standard & Poor’s 500 Index lost 0.7 percent to 1,321.15 at 4 p.m. in New York, after climbing 1.7 percent yesterday. The Stoxx Europe 600 Index slid 0.6 percent. Crude rose 2.5 percent to $104.42 a barrel and gold advanced 0.9 percent to $1,428.60 an ounce as commodity gauges advanced to the highest levels since 2008. Treasuries and the Swiss franc advanced on demand for haven assets.

 U.S. equities wiped out most of a weekly gain as the surge in oil fueled concern that consumer spending may slow, underscored by Labor Department data showing average hourly earnings were unchanged last month. Libya’s rebels clashed with forces loyal to Muammar Qaddafi and President Barack Obama said the U.S. military is ready to protect civilians in the conflict.

 “I’m concerned about hourly earnings being flat,” said Paul Zemsky, New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “With rising gas prices this means that consumers’ real income is not increasing, which will put downward pressure on consumption. I don’t think this is a good number for the equity market.”

Jobless Rate

 Gasoline advanced to a 30-month high on the New York Mercantile Exchange, climbing 0.7 percent to $3.0464 a gallon.

 U.S. employers added 192,000 workers last month, following a 63,000 increase in January and compared with the 196,000 median estimate of economists surveyed by Bloomberg News, Labor Department figures showed. The jobless rate unexpectedly fell to 8.9 percent, defying the median prediction for an increase to 9.1 percent, according to a Bloomberg survey. Separate data from the Commerce Department showed orders to U.S. factories climbed 3.1 percent in January, the most in more than four years.

 Goldman Sachs Group Inc. and Citigroup Inc. lost 2.1 percent and 3 percent, respectively, to help lead financial shares to the biggest decline among 10 groups in the S&P 500 after Bank of America Corp. cut its ratings on both banks. Marvell Technology Group Ltd. tumbled 11 percent as the maker of processors for the BlackBerry phone forecast sales that missed estimates.

 Private payrolls have increased for 12 straight months after plunging by as many as 841,000 jobs when President Obama took office at the depths of the recession in January 2009, Labor Department data show.

95% Rally

 The recovery in the job market has helped propel a rebound in the U.S. equity market after the collapse of the subprime mortgage market triggered the worst bear market since the Great Depression. The S&P 500 has rallied 95 percent from a 12-year low in March 2009, the biggest advance over the same period of time since 1930s, according to data compiled by Howard Silverblatt, senior index analyst at S&P.

 “The numbers point both to a much-needed improvement in the jobs picture and to remaining challenges,” said Mohamed El- Erian, chief executive officer at Newport Beach, California- based Pacific Investment Management Co. He cited declining labor participation as a lingering concern. The labor participation rate held at 64.2 percent, compared with January, and is down from 64.8 percent in February 2010.

 Stocks have also rallied as better-than-estimated data bolstered speculation the U.S. economy can withstand higher costs for energy. Reports this week showed claims for first-time jobless benefits decreased, U.S. businesses grew at the fastest pace in two decades and gauges of manufacturing and service industries climbed to the highest levels since at least 2005.

 Better-than-estimated data pushed the Citigroup Economic Surprise Index to its highest level ever, according to data compiled by Bloomberg.

Franc, Treasuries

 The franc gained against its 16 major counterparts, climbing 0.7 percent to $1.0811 and rising 0.6 percent against the euro. The 10-year Treasury yield slipped seven basis points to 3.49 percent and the two-year yield lost eight basis points to 0.69 percent.

 Markets in Asia closed before the release of the U.S. jobs data. The MSCI AC Asia Pacific Index rose 1.1 percent, with Japan’s Nikkei-225 Stock Average rallying 1 percent. The MSCI Emerging Markets Index added 0.8 percent, extending this week’s advance to 3.4 percent, its best performance for the period in three months.

 South Korea’s Kospi Index climbed 1.7 percent. China’s Shanghai Composite Index jumped 1.4 percent to a more than three-month high before the country’s annual government congress which starts tomorrow. Benchmark gauges in Indonesia, Malaysia and the Philippines rose more than 1 percent.

 Brent crude climbed as much as 1.5 percent to $116.49 a barrel in London. Jet fuel, diesel and gasoline have surpassed $1,000 a metric ton in European wholesale markets for the first time in more than two years, as Libyan exports decline. At the pump, U.K. gasoline retail prices have been at record levels so far this year, averaging 128.8 pence a liter ($7.92 a gallon) in February.

With assistance from Rita Nazareth in New York and Claudia Carpenter, Andrew Rummer, Daniel Tilles, Steve Voss and Jason Webb in London. Editors: Michael P. Regan, Nick Baker.

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