Treasuries and the dollar gained after a report showed American manufacturing unexpectedly shrank in June. Most U.S. equities advanced, while European shares rallied and Italian bonds gained.
Ten-year Treasury yields lost six basis points to 1.59 percent at 4 p.m. in New York, while the dollar rose versus nine of 16 major peers. The Standard & Poor’s 500 Index erased earlier losses after last week capping its best June rally since 1999. The Stoxx Europe 600 Index added 1.5 percent as investors bet central banks will add to efforts to fight the debt crisis. Oil slid 1.4 percent to $83.75 a barrel following a 9.4 percent jump on June 29, its biggest since 2009.
Concern about the U.S. economy grew after the Institute for Supply Management’s manufacturing index fell to 49.7, showing contraction for the first time in almost three years and trailing the median economist estimate of 52. The S&P 500 followed European equities higher in the first half hour of trading after factory output in the euro area topped initial forecasts and manufacturing in Japan and China beat estimates.
“This is not good,” Dan Greenhaus, chief global strategist at broker-dealer BTIG LLC in New York, said in a note to clients. “Not good at all. Despite the decline of manufacturing’s importance to the U.S. economy, the ISM Manufacturing Index remains a premier economic indicator and a reading below 50 in June is incredibly, incredibly worrisome,” he wrote. “Investors have to begin, at a minimum, considering the possibility” that the U.S. will slip into a recession, he said.
About two stocks rose for each one that declined on U.S. exchanges. The S&P 500 increased 0.3 percent after falling as much as 0.5 percent earlier in the day. The Dow Jones Industrial Average dropped 0.1 percent, with DuPont Co., General Electric Co. and Bank of America Corp. losing more than 1.5 percent. JPMorgan Chase & Co., AT&T Inc. and American Express Co. climbed more than 1.4 percent.
Gauges of phone-service providers and utilities rose at least 0.7 percent to lead advances among the main industry groups in the S&P 500. Best Buy Co. added 5.9 percent after the Minneapolis Star-Tribune reported that founder Richard Schulze is close to making a bid for the electronics retailer.
Global equities rallied the most this year on June 29, sending the MSCI All-Country World Index up 3 percent, as European leaders reduced aid requirements for Spain and Italy. The 4.7 percent gain for the month was the most in June since 1999, helping stocks beat the dollar, bonds and commodities in the first half of 2012.