Stocks drop with commodities on Fed concern as yen strengthens

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.

Market Leaders

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.

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