Stocks fell, trimming a 12th consecutive monthly gain in Europe, amid concern the Federal Reserve will pare debt purchases as the economy recovers. Commodities slid as the International Monetary Fund cut China’s growth forecast, while the yen strengthened and dollar weakened.
The Standard & Poor’s 500 Index slipped 0.8% to 1,647.25 at 12:24 p.m. in New York and the Stoxx Europe 600 Index lost 1.9%. Ten-year Treasury yields retreated from the highest level in more than a year, while German bunds dropped as bonds worldwide headed for their steepest monthly slide since April 2004. The yen gained 1.4% to 100.97 per dollar. The S&P GSCI gauge of 24 raw materials slipped 1%, with natural gas, copper and oil pacing losses.
The U.S. is due to sell $35 billion of five-year notes today after a two-year auction yesterday drew the fewest bids since February 2011. That was the first offering since Fed Chairman Ben S. Bernanke said last week the central bank could reduce the pace of its purchases if officials see signs of sustained improvement in growth. The world’s biggest economy grew at an annualized 2.5% pace in the first quarter, unchanged from a preliminary reading last month, economists said before a Commerce Department report tomorrow.
“We’ll have days when people are focusing on the positive economic story and days when people are focusing more on the issue that the Fed has in terms of slowing down their asset purchases and eventually moving interest rates,” Dan Curtin, the Boston-based global investment specialist at J.P. Morgan Private Bank, which oversees about $900 billion, said by telephone.
U.S. stocks erased yesterday’s 0.6% advance in the S&P 500. The index has risen 3.1% so far in May and is poised for a seventh straight monthly gain, its longest rally since 2009.
All 10 of the main groups in the S&P 500 declined, as utility, telephone and consumer staple stocks fell the most. The three groups pay dividends equal to at least 2.8% of their prices, the highest among the 10 industries, and have led the S&P 500’s 1.4% retreat since its last record on May 21 amid concern rising Treasury yields will compete with their payouts. The yield on 10-year Treasury notes fell one basis point to 2.15% after reaching 2.23%, the highest since April 5, 2012. The yield rose 16 basis points yesterday as a report showed U.S. consumer confidence in May reached the strongest in more than five years.
Verizon Communications Inc. slumped 3% and Procter & Gamble Co. lost 2.4% to pace losses among the biggest U.S. companies. Lennar Corp. and PulteGroup Inc. fell at least 2.3% as investors sold shares of homebuilders.
Mortgage applications in the U.S. dropped last week for a third consecutive time as the highest borrowing costs in a year triggered a slump in refinancing. The Mortgage Bankers Association’s index fell 8.8% in the period ended May 24 from the prior week. The group’s refinancing measure slumped 12.3% to the lowest level of the year, while its purchasing measure climbed 2.6%.
The average rate on a 30-year fixed mortgage jumped to 3.90%, the highest level since May 2012, from 3.78% in the prior week. The 0.31 percentage-point surge over the past three weeks has been the biggest over a similar period since early February 2011.
Almost 13 shares dropped for every one that gained in the Stoxx 600 while volume was 7.1% less than the 30-day average. The decline pared this month’s advance to 2% as the gauge headed for the longest monthly winning streak since 1997.
Evraz Plc slid 2.7% after Stoxx Ltd. said it will remove the company from the Stoxx 600 before the start of trading on June 24. Hennes & Mauritz AB dropped 2.5% as Goldman Sachs Group Inc. recommended investors sell the shares.
The MSCI Emerging Markets Index snapped a three-day advance, falling 1%. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 1.6%. China’s expansion will be 7.75% this year and next, David Lipton, first deputy managing director of the IMF, said in Beijing today. In April, the IMF predicted growth of 8% this year and 8.2% in 2014.
The Organization for Economic Cooperation and Development forecast global economic growth will accelerate in 2014 with both the U.S. and Japan continuing to outpace the euro area.
“The global economy is moving forward and it is doing so at multiple speeds,” OECD Chief Economist Pier Carlo Padoan said today in the Paris-based organization’s semi-annual Economic Outlook. Differing monetary and fiscal choices across the major developed economies are driving regional divergence with “each path carrying its own mix of risks,” he said.
Russia’s Micex Index slipped 2.6% to a one-month low as commodities fell. Turkey’s benchmark gauge dropped 3.1%, the most since January. The Philippine Stock Exchange Index jumped 1.6% after Finance Secretary Cesar Purisima said the government will ensure economic growth stays high.
West Texas Intermediate oil slipped 1.5% to $93.59 a barrel and copper retreated 0.7% in New York. China is the biggest buyer of industrial metals and energy. The declines trimmed this month’s gain in the S&P GSCI to 0.8%.
Saudi Arabia, the world’s largest crude exporter, is content with current conditions in the oil market, Ali al-Naimi, the kingdom’s petroleum minister, said in Vienna yesterday. The Organization of Petroleum Exporting Countries will keep its production quota unchanged on May 31, according to two OPEC delegates who asked not to be identified because the decision isn’t final.
Germany’s 10-year bond yield rose four basis points to 1.53%.
Securities in the Bank of America Merrill Lynch Global Broad Market Index have fallen 1.3% in May, poised for the steepest loss since April 2004.
The cost of insuring European corporate bonds rose for the first time in three days, with the Markit iTraxx Europe Index of credit-default swaps linked to 125 investment-grade companies increasing 5 basis points to 99.6 basis points.
The yen appreciated 0.7% to 130.70 per euro. Europe’s 17-nation shared currency rose 0.7% to $1.2943. The Swiss franc gained against all 16 of its major peers, advancing 0.9% versus the euro.
The krona strengthened the most in more than a month against the euro after data showed the Swedish economy expanded at a faster pace than economists predicted in the first quarter. Sweden’s currency appreciated as much as 0.7% against the euro to 8.5832.