Treasuries Gain While S&P 500 Retreats Before Bernanke

Treasuries rose, sending 10-year yields to a three-week low, while U.S. stocks retreated as consumer confidence slid and investors awaited Federal Reserve Chairman Ben S. Bernanke’s speech on the economy in three days.

Ten-year Treasury note yields lost two basis points to 1.63 percent and dropped as low as 1.61 percent. The Standard & Poor’s 500 Index fell 0.1 percent to 1,409.30, while the Stoxx Europe 600 Index declined 0.7 percent. Copper, zinc and nickel fell at least 0.4 percent. Oil advanced while gasoline retreated after yesterday’s rally as Hurricane Isaac approached the U.S. Gulf Coast. Spanish and Italian 10-year yields climbed at least nine basis points.

American consumer confidence fell by the most in 10 months as households grew more pessimistic, a Conference Board report showed, while a reduced economic assessment from Japan highlighted risks of a further global slowdown. U.S. gross domestic product data tomorrow may show faster growth in the second quarter before Bernanke’s speech on Aug. 31 at an annual meeting of central bankers in Wyoming.

“This week is truly the calm before the storm,” Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Trust Co., which manages $6 billion, said in a phone interview. “The market could be easily disappointed. It’s hard to tell how much the market’s move is based on the belief that Bernanke is going to come out with a huge announcement.”

Thirty-year U.S. bonds also increased today, sending yields down one basis point to 2.75 percent. Treasuries have fallen 0.6 percent in August, trimming a loss of as much as 1.6 percent earlier in the month, Bank of America Merrill Lynch data showed.

Treasury Auction

Treasuries remained higher after a U.S. auction of $35 billion in two-year notes attracted stronger-than-average demand. The notes drew a yield of 0.273 percent, compared with 0.275 percent in pre-auction trading. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.94, versus an average of 3.75 at the past 10 sales.

The S&P 500 last week climbed to its highest level on an intraday basis in more than four years, then failed to close at that milestone. The index has fluctuated near the 1,400 level for three weeks as trading slowed toward the end of the U.S. summer and investors awaited the Jackson Hole gathering to gauge prospects for a possible third round of so-called quantitative easing through asset purchases.

Volume for exchange-listed stocks in the U.S. was less than 4.5 billion shares yesterday, the lowest level since at least 2008 excluding days surrounding holidays, data compiled by Bloomberg show. Almost 4.7 billion shares traded hands today, 29 percent below the average for the year.

Stock Leaders

Gauges of raw-material, telephone, utility and industrial companies were the worst performers of the 10 main industry groups in the S&P 500 today, losing at least 0.2 percent, while energy and consumer stocks had the only gains.

Lexmark International Inc. surged 14 percent after the printer maker said it plans to cut 1,700 jobs and shut a factory in the Philippines as it explores a sale of its inkjet technology. H.J. Heinz Co. rose 1.7 percent after reporting preliminary profit that topped estimates. KLA-Tencor Corp., a maker of machinery used in the production of semiconductors, slumped 2.5 percent after Deutsche Bank AG cut its rating.

European stocks extended declines earlier after Catalonia said it will request 5 billion euros ($6.3 billion) from Spain’s financing facility for regional governments. The nation’s benchmark IBEX 35 (IBEX) index dropped 0.9 percent. The region’s equities pared losses as European Union President Herman Van Rompuy said Greece’s future is in the euro and the region’s rescue fund is ready for rapid action to aid Spanish banks.

European Markets

All 19 industry groups in the Stoxx 600 retreated. G4S Plc dropped almost 2 percent after the security company said that first-half profit slumped 73 percent. Deutsche Lufthansa AG lost 0.8 percent after the airline failed to appease an employee union protesting against wage cuts. Vestas Wind Systems A/S surged 19 percent after saying it has started talks with Mitsubishi Heavy Industries Ltd. over possible cooperation.

In European bond markets, Spanish 10-year yields increased nine basis points to 6.48 percent and Italian 10-year rates added 12 basis points to 5.83 percent amid concern the European Central Bank won’t be able to do enough to stem the region’s turmoil as they prepare to meet next week.

Spanish Auction

The yield on Spain’s two-year note fell eight basis points to 3.67 percent as the government sold 3.6 billion euros of bills, surpassing the 3.5 billion-euro maximum target. Germany’s 10-year yield lost one basis point to 1.34 percent. The euro strengthened against 15 of 16 major peers, climbing 0.6 percent to $1.2570, near the highest level since the first week of July.

Fixed-income assets worldwide returned less than 0.1 percent in August, according to a Bank of America Corp. index. Global bonds reversed losses from earlier in August, when they were on course for the worst performance since November 2010, according to the Bank of America Merrill Lynch Global Broad Market Index.

ECB President Mario Draghi canceled his trip to the annual Jackson Hole symposium this week, citing other engagements.

Oil rose 0.9 percent to $96.33 a barrel, gaining for the first time in four days in New York as Isaac reduced offshore output in the Gulf of Mexico and on speculation that U.S. supplies fell to a five-month low. About 93 percent of oil production from the Gulf of Mexico has been shut as Hurricane Isaac approaches, according to the Bureau of Safety and Environmental Enforcement.

Gasoline Retreats

Gasoline futures for September delivery slipped from a nearly four-month high, dropping 0.9 percent to $3.1261 a gallon, on speculation that the impact from Isaac on Gulf Coast refining will be short lived. The contract rallied 2.5 percent yesterday.

The hurricane and a deadly blast at Venezuela’s Amuay refinery threatened to revive a debate about energy costs in the run-up to the presidential election in November.

The MSCI Emerging Markets Index of stocks in developing nations declined 0.4 percent, declining for a third day. The Hang Seng China Enterprises Index of mainland companies declined 0.2 percent and Taiwan’s Taiex index slid 1.4 percent. Russia’s Micex Index added 0.2 percent and India’s Sensex fell 0.3 percent.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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