U.S. Equity Futures Drop, Dollar Rises Amid Europe Crisis

U.S. equity futures fell after the close of regular trading in New York and the dollar rose as European leaders disagreed over the next steps to end the sovereign-debt crisis.

Futures on the Standard & Poor’s 500 Index (SPX) slid 0.4 percent to 1,317.20 as of 7:21 p.m. in New York. The U.S. equity gauge fell 0.2 percent during regular trading, paring a decline of as much as 1.4 percent. The Dollar Index added 0.2 percent to 82.81. The euro was little changed at $1.2437.

European Union leaders struggled to meet demands by Spain and Italy for relief from rising borrowing costs, threatening to derail a 120 billion-euro ($149 billion) pledge to boost economic growth. Italy is withholding its official endorsement of the initiative as it pushes for collective action at an EU summit in Brussels to push down its bond yields, said two Italian officials who spoke on the condition that they not be named.

The S&P 500 retreated after a two-day, 1.4 percent advance. Initial jobless claims were 386,000 last week and the prior week’s reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012. A Labor Department report on June 1 showed American employers added the fewest jobs in a year, sending the S&P 500 to a five-month low and 10-year Treasury yields to a record low that day.

Regular Trading

JPMorgan Chase & Co. (JPM) slumped 2.5 percent before the 4 p.m. close. The New York Times reported the lender’s losses from credit derivatives may eventually total as much as $9 billion, exceeding the firm’s initial estimate. Losses have increased in recent weeks as JPMorgan sought to exit its holdings, the paper reported, citing unidentified former traders and executives at the bank.

Cisco Systems Inc. (CSCO), the largest maker of computer- networking gear, slipped 1.5 percent after Lazard Ltd. said in a note today that the company may be seeing weaker-than-expected demand trends.

Indexes of technology, consumer and health-care companies led declines among the 10 main industries in the S&P 500. Energy and telephone companies rose the most.

Commercial health insurers including WellPoint Inc. fell after the U.S. Supreme Court upheld most of Obama’s health-care legislation, while Tenet Healthcare Corp. (THC) paced gains in hospitals. Tenet, the third-biggest hospital chain, climbed 5.4 percent. WellPoint tumbled 5.2 percent.

Health Ruling

The court, voting 5-4, mostly left intact the Affordable Care Act’s transformation of the health-care system, saying Congress has the power to make Americans get insurance or pay a penalty. The justices limited a plan to expand the Medicaid system for the poor by about 16 million people.

The yield on the 10-year Treasury note fell three basis points to 1.58 percent, dropping for the second straight day, as demand for refuge from Europe’s financial turmoil pushed rates to a record low of 1.075 percent at a government auction of $29 billion in seven-year notes.

The dollar strengthened against 12 of 16 major peers. Silver, oil, natural gas and gold lost at least 1.5 percent as 18 of 24 commodities tracked by the S&P GSCI Index retreated. Corn halted a four-day rally sparked by concern a heat wave in the U.S. Midwest will damage crops. Natural gas futures dropped for the first time in six days after a government report showed that U.S. stockpiles rose more than forecast last week.

European Stocks

The Stoxx 600 declined for the fifth time in six days as banks and chemical companies led losses. Barclays Plc (BARC) plunged 16 percent after fines for falsifying London interbank-offered rate submissions sparked speculation lawsuits will follow. Commerzbank AG sank 7.2 percent as the lender issued new shares.

The MSCI Emerging Markets Index fell 0.7 percent, its first decline in three days. The Shanghai Composite Index sank 1 percent, erasing this year’s gains. Russia’s Micex Index slid 1.7 percent and South Africa’s benchmark gauge lost 1.5 percent.

The German 10-year bond yield declined five basis points to 1.51 percent, leaving the difference in yield between Europe’s benchmark government security and the Spanish bond seven basis points higher at 543 basis points, or 5.43 percentage points.

The number of Germans out of work rose a seasonally adjusted 7,000 to 2.88 million, the Nuremberg-based Federal Labor Agency said. Economists forecast an increase of 3,000, the median of 30 estimates in a Bloomberg News survey showed. Europe’s sovereign debt crisis will damp the German economy’s performance this year, the Ifo economic research institute said.

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: Lynn Thomasson at lthomasson@bloomberg.net

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