Stocks Fall on Economic Data as French, Spain Bonds Drop

Photographer: Scott Eells/Bloomberg

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Photographer: Scott Eells/Bloomberg

Traders work at the New York Stock Exchange.

U.S. stocks fell for a second day as data on manufacturing, home sales and jobless claims tempered optimism in the economy, overshadowing improving earnings. Spanish and French bonds slid; Treasuries and commodities rose.

The Standard & Poor’s 500 Index slipped 0.6 percent to close at 1,376.92 at 4 p.m. in New York after rising as much as 0.4 percent. The Stoxx Europe 600 Index (SXXP) fell 0.5 percent, erasing an earlier 1 percent rally. The S&P GSCI gauge of commodities rose 0.2 percent as crops led gains. Ten-year Treasury yields lost one basis point to 1.97 percent as rates on French and Spanish 10-year bonds climbed at least eight basis points, reviving concern about Europe’s debt crisis.

U.S. reports today showed existing-home sales unexpectedly fell 2.6 percent, the Federal Reserve Bank of Philadelphia’s manufacturing index trailed estimates and jobless claims exceeded projections. Morgan Stanley (MS) and Bank of America Corp. reported earnings were boosted by higher trading revenue, while Ebay Inc. surged as its PayPal payments service fueled profit growth.

“You’ve got a lot of counter-balancing points,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a phone interview. “The jobless claims number was disappointing, while corporate earnings have been coming in stronger than expected,” he said. “Investors are looking at each incremental data point trying to draw conclusions.”

Market Leaders

Technology, industrial and consumer-discretionary stocks helped led losses in the 10 main S&P 500 industry groups, while telephone companies posted the biggest gains. DuPont Co. lost 1.2 percent to help lead declines in the Dow Jones Industrial Average after the chemical company said quarterly sales volumes fell 2 percent, led by declines in the electronics unit and in the Asia-Pacific region.

Financial shares in the S&P 500 slipped 0.4 percent as a group. Wall Street banks will have two years to implement the so-called Volcker rule so long as they make a “good faith” effort to comply with the ban on proprietary trading, U.S. regulators said. Banks will have the “full two-year period” provided by the Dodd-Frank financial overhaul law to “fully conform” their activities and investments, the Federal Reserve and four other U.S. agencies said in a statement today.

The Philadelphia Fed’s general economic index decreased to 8.5 in April, the lowest level since January and less than the median forecast of economists for a reading of 12. The Labor Department reported initial jobless claims of 386,000 last week, topping the median estimate of 370,000.

Verizon, Apple

Verizon Communications Inc. climbed 1.3 percent as smartphone demand boosted subscriber count, while Apple Inc. lost 3.4 percent and was the biggest drag on the S&P 500 after Verizon said iPhone sales slowed. Qualcomm Inc. (QCOM), the biggest maker of mobile-phone semiconductors, declined 6.6 percent as its third-quarter forecasts fell short of some projections on increased spending to bolster chip output.

Ebay surged 13 percent, the biggest gain in almost seven years. Travelers Cos. jumped 3.8 percent as the insurer’s profit beat estimates and the company boosted its dividend by 12 percent.

Profits for S&P 500 companies probably rose 1.7 percent in the first quarter and 2 percent in the following period, according to analysts’ estimates compiled by Bloomberg.

Commodities Gain

Corn rallied 3 percent on signs of rising demand for supplies from the U.S. and wheat climbed more than 2 percent to lead gains in 17 of 24 commodities tracked by the S&P GSCI Index, which climbed 0.2 percent. Oil slipped 0.4 percent to $102.27 a barrel.

Among European stocks, Publicis Groupe SA dropped 4.1 percent as France’s largest advertising company said growth will slow this quarter. SKF AB, the world’s biggest maker of ball bearings, rose 4.9 percent after forecasting higher sales in the U.S. and Asia.

Spain’s 10-year bond yield increased 10 basis points, or 0.10 percentage point, to 5.93 percent and France’s yield added eight basis points to 3.10 percent. The French rate increased to 141 basis points above yields on benchmark German bunds, the highest level since January.

Spain sold 2.54 billion euros ($3.3 billion) of two-year and 10-year debt today, compared with a maximum target of 2.5 billion euros, and France auctioned 8 billion euros.

Spain sold the 10-year benchmark bonds at an average yield of 5.743 percent, compared with 5.789 percent on the secondary market before the auction, and 5.403 percent when it last sold the debt in January. It auctioned two-year securities at 3.463 percent. France issued 2.7 billion euros of benchmark five-year securities at an average yield of 1.83 percent, up from 1.78 percent on March 15.

French Credit Risk

French credit risk climbed to the highest in three months on concern anti-business policies will be adopted after the presidential election as Europe’s debt crisis deepens. The cost of insuring the nation’s sovereign debt rose one basis point to 201 basis points, according to CMA .

Credit-rating companies will probably downgrade France over the next two to three years regardless of whether President Nicolas Sarkozy or his Socialist challenger, Francois Hollande, wins the election, Citigroup Inc. economist Michael Saunders wrote in a client note today. The nation may be cut one level by both S&P and Moody’s Investors Service, he wrote. Italy, Spain, Ireland and Portugal also face potential downgrades, he wrote.

IMF Resources

Christine Lagarde, managing director of the International Monetary Fund, says she hopes to raise more than $320 billion in additional lending resources. That figure is not the “final ask,” she said in a Bloomberg Television interview today, adding that she expects countries to announce additional contributions.

In Asia, Hong Kong’s Hang Seng Index (HSI) advanced 1 percent. China will boost liquidity by cutting reserve requirement ratios if necessary, Xinhua News Agency said, citing an unidentified central bank official. The nation may also increase open market operations including reverse repurchase agreements and redemption of central bank bills, the report said.

The yen weakened against all 16 major peers as Bank of Japan Governor Masaaki Shirakawa pledged to continue monetary easing. Growth in developed economies remains “anemic,” Shirakawa said yesterday in New York. The dollar climbed against nine of 16 major peers.

The MSCI Emerging Markets was little changed. Russia’s Micex Index gained 1.9 percent as steelmaker OAO Severstal jumped 5.7 percent after fourth-quarter profit beat estimates.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

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

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