Stocks fall with euro on Greece concern while commodities gain

U.S. benchmark stock indexes slipped from four-year highs and the euro fell for the first time in four days as Greece struggled to qualify for aid. Copper rose on speculation policy makers will work to support growth.

The Standard & Poor’s 500 Index declined 0.6 percent to 1,429.08 at 4 p.m. in New York. The euro depreciated 0.4 percent to $1.2759, retreating from a three-month high. Italy’s 10-year bonds fell for the first time in six days. Coffee, zinc, natural gas and aluminum led gains in commodities. Ten-year Treasury yields slipped one basis point to 1.66 percent.

Greek Prime Minister Antonis Samaras met officials from the nation’s creditors today after failing to secure agreement from coalition partners on spending cuts. Italy’s economy shrank more than previously reported, China’s industrial output grew at the slowest rate since 2009 and Japan’s economy expanded at half the pace initially estimated, reports showed. Federal Reserve officials meet Sept. 12-13 after U.S. jobs growth in August trailed estimates.

“Europe will continue kicking the can down the road and there’s no quick solution,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview. “Macro numbers have been very unimpressive, but there’s this aspect of expansionary monetary policy decisions that have been driving prices higher,” he said. “The market will turn on what the Fed does this week.”

Fed Bets

Money market traders expect the Federal Reserve to keep borrowing costs at record lows for about three more years as the economic outlook worsens. Six months ago, they expected the Fed to raise interest rates by the end of 2013.

Bond market measures from overnight index swaps, which indicate no increase in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.

A gauge of indicators of market expectations for additional central bank stimulus rose to a record 99 percent in August, according to Citigroup Inc. The measure increased to 82 percent in the months before the second round of quantitative easing in November 2010.

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