Stocks fall most this year, euro weakens as Spain yields surge

Stocks tumbled the most this year and the euro slid while Spanish bond yields surged amid renewed concern about Europe’s debt crisis. U.S. Treasuries rose, while oil fell after the longest stretch of weekly gains since 2004.

The Standard & Poor’s 500 Index dropped 0.9 percent to 1,500.21 at 3:06 p.m. in New York, falling from a five-year high, and the Stoxx Europe 600 Index closed 1.5 percent lower. The euro declined 0.9 percent to $1.3519, retreating from the strongest level since November 2011. Spanish 10-year yields jumped 23 basis points to 5.44 percent and Italy’s rates added 14 points. Ten-year U.S. yields lost five basis points to 1.97 percent. Oil sank 1.6 percent to $96.17 a barrel, leading commodities lower, after capping an eighth straight weekly gain.

Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank AG said this year’s rally in Italian and Spanish bonds may falter as Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month. In the U.S., growth in factory orders trailed economist estimates.

“The market is realizing that there are still substantial risks out there, especially on the political front,” said Michael Leister, a fixed-income strategist at Commerzbank AG in London. “The dynamics in Spain are devastating because they have the potential to cause a lot of damage. If in the worst case we would get a new election in Spain, this would be a real shocker for the market.”

Market Movers

All 10 groups in the S&P 500 fell at least 0.2 percent, sending the benchmark gauge down the most since Dec. 28 and trimming its year-to-date gain to 5.2 percent. Technology, consumer-discretionary and financial shares led losses in the S&P 500. Travelers Cos., Merck & Co. and Pfizer Inc. fell more than 1 percent for the biggest declines in the Dow Jones Industrial Average, which retreated after climbing above 14,000 last week for the first time since 2007.

Wal-Mart Stores Inc. fell 1.2 percent as JPMorgan Chase & Co. cut its rating on the world’s largest retailer.

“It’s a little bit of a breather,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.8 billion. “In Europe, Italian, Spanish and Portuguese bond yields are up a bit there and that’s partly causing it. Nevertheless, the market in the U.S. has been strong since the beginning of the year and we don’t see a whole lot to change that trend.”

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