Stocks in U.S. Retreat as Euro, Oil Fall; Treasuries, German Bunds Climb

U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from the highest level since 2008, while the euro weakened and Treasuries gained as Spain raised its budget-deficit estimate for 2012 and German retail sales unexpectedly declined. Bond risk rose and oil declined.

The S&P 500 lost 0.3 percent to 1,369.63 at 4 p.m. New York time. The Stoxx Europe 600 Index (SXXP) added 0.1 percent. The euro slid 0.8 percent to $1.3209. Spain’s 10-year yield increased for the first time in three days and the cost of insuring European sovereign bonds rose for the first time in four days. Ten-year Treasury yields lost five basis points to 1.98 percent and German bund yields slipped seven basis points to 1.8 percent. Oil tumbled 2 percent to $106.70 a barrel.

Spanish Prime Minister Mariano Rajoy announced a new deficit target of 5.8 percent of gross domestic product compared with the 4.4 percent target previously agreed with the European Union. Sales in Germany declined 1.6 percent from December, compared with a 0.5 percent gain predicted by economists, the Federal Statistics Office said today.

“There’s a whole too far, too fast thing,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a telephone interview. His firm oversees more than $12 billion. “We don’t think that means it’s going to have a huge pullback, but a consolidation would be a relief.”

Energy Stocks

Energy shares had the biggest decline in the S&P 500 among 10 groups as crude oil fell after yesterday topping $110 a barrel for the first time since May. Big Lots Inc. lost 4 percent as sales missed analysts’ estimates. Yelp Inc., the site that lets users review everything from diners to dentists, surged 64 percent in its first day of trading. Sara Lee Corp. (SLE) rose 7.1 percent after saying it will spin off a coffee-and-tea unit.

Today’s decline threatened to send the S&P 500 to a weekly loss for just the second time this year, trimming its five-day gain to 0.3 percent. The index is up 8.9 percent in 2012 and has rallied 25 percent from its 2011 low in October amid improving economic data and better-than-forecast earnings.

“We have positive signs for the Dow, the S&P” and other major indexes,’’ Louise Yamada, technical analyst at Louise Yamada Technical Research Advisors LLC, told Bloomberg Television’s Tom Keene. “We suspect that any pullback or pause here should be one that refreshes.” Yamada said on Feb. 8 that the Nasdaq Composite Index has entered a bull market and stocks may continue to rally through the end of March.

Euro Weakens

The euro weakened against 10 of 16 peers, while the dollar strengthened against 14 of 16. The Dollar Index, a gauge of the currency against six major peers, climbed for a third day, rising 0.8 percent to 79.42. The yen depreciated 0.8 percent against the dollar, leaving it lower for the fourth consecutive week, the longest run of declines since November 2010.

Euro-area finance ministers authorized yesterday the region’s bailout fund to issue bonds for the Greek debt restructuring, the first step in releasing funds from the rescue package.

Spain’s 10-year bond yield increased four basis points to 4.91 percent after yesterday sliding to the lowest in a month. Spain raised its budget deficit target for 2012 as a deepening economic slump hampers efforts to rein in the euro area’s fourth-biggest shortfall.

“I didn’t communicate the deficit target to the heads of state, nor do I have to,” Rajoy said after a summit of European leaders in Brussels today. “This is a sovereign decision taken by Spain and I will communicate it to the commission in April, just like the rest of the countries.”

Italian Bonds

The yield on Italy’s 10-year bond fell four basis points to 4.91 percent, after climbing as much as 10 basis points. Bonds erased declines after a report showed the economy expanded 0.4 percent last year, topping a 0.3 percent forecast. The price of Italy’s 10-year security climbed for the eighth successive week, the longest run since a nine-week streak ended March 1998.

The Greek 10-year bond tumbled for the third day, driving the yield 66 basis points higher to a record 37.10 percent.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 8.9 basis points to 346.

Shares of European banks climbed 0.6 percent as a group after they were upgraded by Goldman Sachs Group Inc. analysts, who said they anticipate a boost in liquidity and profit from the European Central Bank’s three-year loans.

The banking industry was raised to “overweight” from “neutral,” according to a Goldman note to clients dated March 1. Even after this year’s gain by shares of the region’s lenders, the stocks are still not expensive, analysts including Matthieu Walterspiler and Sharon Bell wrote.

Commodities

The S&P GSCI (SPGSCI) gauge of 24 commodities fell 1.2 percent, the first weekly retreat in four weeks. Gold futures slumped 0.7 percent to $1,709.80 an ounce, capping the biggest weekly loss since December.

Oil fell for the first time in three days after Saudi Arabia denied a report of a pipeline explosion in its Eastern province and President Barack Obama said a pre-emptive strike on Iran might generate sympathy for the Persian Gulf country, easing concern that an attack would take place.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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