U.S. Stocks Pare Gain on Concern European Banks Need Capital

U.S. stocks pared gains amid concern European banks will need to raise capital to offset losses on government bonds, trimming an early rally triggered by a bigger- than-forecast drop in jobless claims.

Deutsche Bank AG, Germany’s largest lender, dropped 3.3 percent in U.S. trading and financial shares in the Standard & Poor’s 500 Index trimmed their rally after three people with knowledge of the dissucssions said the company may sell as much as $11.4 billion in stock.

The S&P 500 climbed 0.6 percent to 1,105.42 at 1:05 p.m. in New York after surging more than 1 percent in earlier trading. The Dow Jones Industrial Average advanced 34.13 points, or 0.3 percent, to 10,421.14 after climbing almost 90 points earlier.

“It’s a mistake to react negatively to the EU bank headlines,” Dave Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore, said in a note to clients. “Guess who doesn’t have exposure to EU sovereigns?” he asked. “U.S. banks. Buy these headlines. Your EU counterparts will be rotating from EU into U.S. banks.”

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