Stocks and commodities sank, sending the Standard & Poor’s 500 Index and oil to more than one-year lows, and the euro slid as concern about Europe’s debt crisis overshadowed higher-than-estimated U.S. economic data. Treasury bonds rallied as the Federal Reserve bought longer-term debt.
The Standard & Poor’s 500 Index lost 2.9 percent to 1,099.23 at 4 p.m. New York time as Bank of America Corp. plunged 9.6 percent to a 30-month low. The Stoxx Europe 600 Index slid 1.1 percent. The S&P GSCI Index of commodities fell 0.9 percent and reached a 10-month low. The euro dropped versus 13 of 16 major peers, sinking to the lowest level in more than a decade against the yen. The 30-year Treasury yield plunged 18 basis points to 2.74 percent, the least since January 2009.
The S&P 500 closed at the lowest level since Sept. 8, 2010, and came within 1 percent of extending its decline from this year’s high to 20 percent, the common definition of a bear market. German Finance Minister Wolfgang Schaeuble opposed moves to increase the scale of the euro rescue fund, damping speculation of a breakthrough in Luxembourg talks to quell the debt crisis. Greece passed plans to cut its budget deficit that missed previous goals set as part of its bailout conditions.
“Europe is still going to be the focus,” Peter Jankovskis, who helps manage about $2.2 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “The ’risk-on, risk-off’ trade is going to continue.”
U.S. stocks extended declines after briefly erasing losses in early trading following data on manufacturing industries and construction spending that topped economists’ estimates. The Institute for Supply Management’s factory index climbed to 51.6 last month from 50.6 in August, above the level of 50 that is the dividing line between growth and contraction and higher than the median forecast of economists surveyed by Bloomberg News for a drop to 50.5. The Commerce Department said construction spending increased 1.4 percent in August, defying the median forecast for a 0.2 percent drop.
Losses increased in the S&P 500 after the gauge fell below a series of levels considered significant by analysts and traders whose investment decisions are influenced by charts. The index slipped below 1,119.46, its lowest close of the year, just before 12:50 p.m. and breached 1,114.22, the worst intraday level of September, about 15 minutes later.
“There’s reason to think that the bears will take control,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, said in a telephone interview. “We violated that low for the year. It could definitely lead to some accelerated selling here.”
The S&P 500 tumbled 14 percent in the third quarter, while the Stoxx 600 sank 17 percent and the S&P GSCI slid 12 percent, with each posting its biggest drop since the fourth quarter of 2008 amid the aftermath of Lehman Brothers Holdings Inc.’s bankruptcy.
Bill Gross, the manager of the world’s biggest bond fund, said the global economy risks lapsing into a recession because “sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack,” according to a monthly investment outlook posted on his Pacific Investment Management Co.’s website today.
Bank of America sank 9.6 percent to $5.53, its lowest price since March 11, 2009. The largest U.S. bank by assets said that access to its online accounts was slower or halted for a second consecutive weekday because of heavy customer traffic. Company spokeswoman Tara Burke denied rumors that the slowness was the result of hacking.
Financial, Energy Shares
Financial and energy companies led losses in all 10 industry groups in the S&P 500, with the groups dropping at least 3.3 percent. All but one of 81 companies in the S&P 500 Financials Index retreated, dragging the gauge to the lowest level since July 2009. Citigroup Inc. lost 9.8 percent and JPMorgan Chase & Co. fell 4.9 percent. Alcoa Inc., which will unofficially mark the start of the third-quarter earnings season next week, slid 7 percent after JPMorgan cut its earnings and share-price estimates.
AMR Corp. tumbled 33 percent, the most in eight years, on growing concern the airline may be forced to seek bankruptcy protection. A Chapter 11 filing “is certainly not our goal or our preference,” said Andy Backover, an American spokesman. “We know we need to improve our results, and we have a sense of urgency as we work to achieve that.”
All but two of 19 industry groups declined in the Stoxx 600 as Commerzbank AG, Germany’s second-largest lender, and Societe Generale SA of France dropped more than 5 percent. Dexia SA slumped 10 percent in Brussels on concern the bank is struggling to fund itself and will need a second bailout.
The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe’s sovereign debt crisis, according to two people with knowledge of the matter.
Regulators held informal talks with some of the largest European banks about producing a “fourth-generation daily liquidity” or 4G report, according to the people, who asked for anonymity because communications with central bankers are confidential. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person. The U.S. has already increased the number of examiners embedded in these banks, the person said.
The Financial Stability Board backed plans for the world’s largest banks to set aside additional capital and develop measures to wind down their operations in a crisis, the group’s chairman Mario Draghi said today.
The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings climbed as much as eight basis points to 210.5, the highest since December 2008 and approaching the record 215 basis points set that month, according to JPMorgan.
“The big issue in the euro zone remains avoiding contagion from the all-but-inevitable Greek sovereign default,” Larry Hatheway, the head of macro strategy at UBS AG in London, wrote in a report today. We are “unlikely to get much relief from euro zone uncertainties in the coming months.”
The yield on the Greek 10-year bond lost six basis points to 22.62 percent. The yield on Italy’s two-year security fell five basis points and Spain’s increased one point as the European Central Bank bought the nations’ bonds, according to four people with knowledge of the transactions. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose 1.9 basis points to 342.35, compared with the record high of 358.5 set Sept. 23, according to CMA.
The Greek government passed 6.6 billion euros ($8.8 billion) of austerity measures to cut the 2012 deficit to 6.8 percent of gross domestic product, missing the 6.5 percent goal previously set with the European Union, International Monetary Fund and European Central Bank, known as the troika. Finance Minister Evangelos Venizelos had earlier said Greece would miss the targets and the troika accepted the new budget. Euro region finance ministers meet again Oct. 13 to decide on a sixth bailout payment.
The euro depreciated 1.5 percent to $1.3193, the lowest since January. The European currency dropped 2 percent to 101.08 yen, the lowest against its Japanese counterpart since June 2001. The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 1.3 percent and the yen strengthened against all 16 major peers.
Ten-year Treasury yields slid 17 basis points to 1.75 percent and the spread between five-year and 30-year securities decreased to 187 basis points, the narrowest on a closing basis since October 2009. The Fed bought Treasuries today maturing from February 2036 through August 2041, the first under a program announced Sept. 21 to buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less to keep borrowing costs down.
Among 24 commodities tracked by the S&P GSCI Index, 16 retreated. Crude oil for November delivery decreased 2 percent to $77.61 a barrel, the lowest settlement since Sept. 28, 2010. Nickel surged 8.1 percent, while gold futures jumped 2.2 percent to $1,657.70 an ounce
The MSCI Emerging Markets Index sank 3.2 percent, following its 23 percent plunge in the three months ended Sept. 30.
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