U.S. Stocks Retreat; Dollar Index Extends Longest Rally

Stocks fell as talks to form a new Greek government failed and concern grew about the stability of the nation’s banks, while the Dollar Index extended its longest rally ever as the euro slid to a four-month low.

The Standard & Poor’s 500 Index (SPX) fell 0.6 percent to close at a three-month low of 1,330.66 at 4 p.m. in New York. The Dollar Index, (DXY) a gauge of the currency against six major peers, rose for the 12th straight day. The Stoxx Europe 600 Index closed at the lowest level of the year and oil slumped to a five-month low. Ten-year Treasury yields were little changed at 1.77 percent while Spanish and Italian 10-year yields rose at least 12 basis points.

U.S. equities extended losses in the final hour of trading as concern about Greece overshadowed data showing New York-area manufacturing grew more than forecast. Leaders said a second election will be held after political gridlock left Greece without a government since elections on May 6. Greeks have withdrawn as much as 700 million euros ($893 million) from the nation’s banks, President Karolos Papoulias told party leaders yesterday, according to transcripts released today.

“The politics in Greece is very frustrating for the market,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “While the overall economic data in the U.S. was mixed to positive, the risk related to Greece remains a concern on the minds of investors.”

Economic Data

The New York Fed’s general economic gauge, known as the Empire manufacturing index, increased to 17.09 this month from 6.6 in April, topping the median economist estimate for a reading of 9. Gross domestic product in Germany, Europe’s largest economy, rose 0.5 percent from the fourth quarter, compared to a 0.1 percent gain forecast by economists, while growth in the euro area stagnated, reports showed today.

Gauges of energy and raw-material producers slumped 1.5 percent and industrial shares slipped 0.6 percent to lead declines among all 10 of the main industry groups in the S&P 500. Home Depot Inc., Hewlett-Packard Co. and Alcoa Inc. (AA) lost more than 2.3 percent for the biggest declines in the Dow Jones Industrial Average, which slipped 63.35 points to 12,632.00 for its lowest close since Jan. 19.

JPMorgan Chase & Co. rebounded 1.3 percent after falling 12 percent in the previous two sessions, its biggest drop in three years. Chief Executive Officer Jamie Dimon told shareholders at the company’s annual meeting that he sees no reason the bank’s dividend would be affected following a $2 billion trading loss disclosed last week. The Department of Justice and the Federal Bureau of Investigation have begun a criminal probe of the loss, a person familiar with the matter said.

Groupon Inc. (GRPN) rose 3.7 percet, trimming a rally of as much as 27 percent, after the largest daily-deal website reported first-quarter profit that topped analysts’ estimates.

Homebuilders Rally

A measure of homebuilders in S&P indexes climbed 2.2 percent. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 29, the highest since May 2007. The gauge exceeded the highest projection in a Bloomberg News survey in which the median estimate was 26. Lennar Corp. and D.R. Horton Inc. rose more than 2.5 percent each to pace gains.

Facebook Inc. (FB) boosted the price range on its initial public offering to seek as much as $12.8 billion. The new range is $34 to $38 a share, a regulatory filing today shows, implying a market value of as much as $104.2 billion.

The S&P 500 today extended its drop from a four-year high in April to 6.2 percent. The index took longer than usual to fall 5 percent from its peak this year, a sign that any further retreat in U.S. stocks will be “contained,” according to Sam Stovall of S&P.

Retreat From Peak

The benchmark gauge reached the threshold yesterday after spending 28 days without losing 5 percent from its April high. Since 1950, it has taken an average 19 days to fall 5 percent, based on a study by Stovall, S&P’s chief equity strategist. Among those that took 28 days or longer to occur, only 25 percent turned into corrections, or retreats of more than 10 percent, the data show. Stovall said in an e-mail that he views losses of less than 5 percent as “noise” and declines between 5 percent and 10 percent as pullbacks.

The euro weakened 0.8 percent to a four-month low of $1.2727. The shared currency fell against 12 of 16 major peers, while the dollar increased against 15 of 16. The Dollar Index climbed 0.8 percent to 81.272, the highest level since January, as the gauge extended the longest stretch of daily gains since its inception in 1973.

Commodities

Natural gas rallied 3.6 percent and corn and wheat climbed at least 1.7 percent to lead gains in 16 of 24 commodities tracked by the S&P GSCI Index, while declines in oil and gold left the gauge little changed.

Oil futures dropped 0.8 percent to $93.98 a barrel before a government report tomorrow that is forecast to show U.S. crude supplies climbed to the highest level since 1990.

Gold futures for June delivery slipped 0.2 percent to settle at $1,557.10 an ounce on the Comex in New York. Prices earlier slid to $1,546.80, the lowest since Dec. 30.

Gauges of commodity companies and banks fell more than 1.7 percent to lead declines among 16 of 19 industry groups in the Stoxx 600. (SXXP) Spain’s IBEX 35 Index sank 1.6 percent to an almost nine-year low and Italy’s benchmark index slid to the lowest since March 2009. Greece’s ASE Index slid 3.6 percent to the lowest level since November 1992.

Greece Election

German Finance Minister Wolfgang Schaeuble called Greece’s decision to hold a second election a referendum on whether the country stays in the euro. Post-election attempts to form a ruling coalition in Athens broke down today after nine days, sending Greeks back to the polls next month with surveys giving the lead to an anti-bailout party that would tear up the conditions attached to 240 billion euros ($307 billion) of aid.

The MSCI Emerging Markets Index (MXEF) lost 0.6 percent as Brazil’s Bovespa index sank 2.3 percent. India’s Sensex Index rose 0.7 percent and the Hang Seng China Enterprises Index of mainland stocks jumped 1 percent. The Shanghai Composite Index slipped 0.3 percent after a report showed foreign direct investment dropped. The Philippine Stock Exchange Index (PCOMP) sank 2.1 percent on concern a territorial dispute with China will escalate.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@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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