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Stocks Drop on Economy Data as Gasoline Jumps on Supplies

U.S. stocks extended their worst weekly decline since June, while the dollar and Treasuries rose, as reports showed weakening economic growth. Gasoline surged on concern about tighter supplies in the U.S. East Coast.

The Standard & Poor’s 500 Index slipped 0.5 percent to 1,440.67 at 4 p.m. in New York, finishing the week down 1.3 percent. The Stoxx Europe 600 Index declined 1.2 percent and tumbled 2.7 percent in five days. Ten-year Treasury yields fell two basis points to 1.63 percent after losing six points earlier. The dollar rose against 13 of 16 major peers. Gasoline jumped the most since March, leading commodity gains.

U.S. equities slipped for the fourth day this week, trimming the S&P 500’s monthly gain to 2.4 percent and its third-quarter advance to 5.8 percent. Business activity in the U.S. unexpectedly contracted in September for the first time in three years, a private report showed, while Japan’s industrial production fell more than forecast. Stocks trimmed losses as stress tests results showed Spain’s banks have a smaller capital shortfall than some traders speculated.

“We’re seeing data that are consistent with stall speed growth,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York. “It’s disappointing. We wanted to see acceleration. As for Europe, there’s always going to be anxiety. We’ve seen this movie before.”

Chicago PMI

Benchmark U.S. stock indexes extended weekly declines as the Institute for Supply Management-Chicago Inc. said its business barometer fell to 49.7 this month from 53 in August. A reading of 50 is the dividing line between growth and contraction. U.S. household purchases rose 0.5 percent, matching the median estimate of economists, while the Thomson Reuters/University of Michigan final sentiment index rose to 78.3 this month from 74.3 in August, trailing the median economist estimate of 79.

Bank of America Corp., McDonald’s Corp. and Intel Corp. lost more than 1.5 percent to lead declines in 25 of 30 stocks in the Dow Jones Industrial Average. (INDU) Nike Inc. (NKE), the largest sporting-goods company, slipped 1.1 percent after reporting future orders that trailed estimates as demand sank in China. McDonald’s dropped 1.6 percent after Janney Montgomery Scott LLC cut its recommendation for the shares.

Apple Inc. (AAPL), the largest company by market value, slipped 2.1 percent today and extended this week’s decline to 4.7 percent, its worst drop since May. Chief Executive Officer Tim Cook apologized for the iPhone mapping software released last week that has been widely criticized for flaws such as steering people in the wrong direction.

RIM Rallies

Research in Motion Ltd. (RIM) rallied 5 percent after the maker of BlackBerry mobile devices posted a fiscal second-quarter loss of 27 cents, less than the 47-cent loss that analysts had estimated.

U.S. equities have outperformed fixed-income investments this quarter and pension funds may have needed to sell stocks this week to rebalance asset allocations, according to UBS AG strategist Boris Rjavinski.

American pension funds, which UBS estimates hold about 55 percent of their $5 trillion in stocks, may have needed to pull as much as $36 billion from equities and put as much as $19 billion into fixed income, Rjavinski wrote in a note dated Sept. 24. The largest outflows were projected to be from stocks of large U.S. companies, with as much as $21 billion being sold.

The Stoxx 600 pared its rally this quarter to 6.9 percent. The London Stock Exchange Group Plc (LSE) slumped 8 percent today and 12 percent this week, its biggest decline since 2008, after saying that European Union regulations will cut income from its Italian central counterparty and may require LCH.Clearnet Group Ltd. to increase capital.

European Movers

Cap Gemini SA (CAP) added 0.8 percent and Atos (ATO) gained after Accenture Plc (ACN) forecast full-year earnings late yesterday that exceeded analysts’ estimates. Accenture surged 7.4 percent in New York trading after the world’s second-largest technology consulting company projected earnings of as much as $4.30 a share, exceeding the average analyst estimate of $4.13.

All 19 industry groups in the Stoxx 600 retreated and banks were the biggest drag, with Spanish lenders Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA losing at least 1.9 percent to pace declines.

Stress Tests

Results of Spain’s stress test released after European markets closed showed the banks have a combined capital shortfall of 59.3 billion euros. The tests were a precursor to the formation of a so-called bad bank to which troubled lenders will transfer soured real estate to bolster their balance sheets. The independent stress test to assess the damage wrought by the property crash is a condition of Spain’s 100 billion-euro ($129 billion) banking bailout agreed in July.

The Bankia group, a nationalized lender, had a 24.7 billion-euro capital deficit in the tests conducted by management consultants Oliver Wyman that also showed Banco Popular Espanol SA had a 3.22 billion-euro shortfall. The stress tests of 14 lenders showed no capital deficit for seven banks, including Santander SA, BBVA and Banco Sabadell SA.

“The focus is back on Europe at this point,” Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina, said in a telephone interview. “It’s this ebb and flow of crisis- response-complacency. You get everything fine for a while and then increase in stress.”

European Yields

Spain’s 10-year yield was down one basis point at 5.94 percent after rising 12 points earlier.

German 10-year bond yields declined two basis points to 1.44 percent. The securities capped their sixth straight quarterly advance, the longest run since 1998.

The S&P GSCI has rallied 11 percent during the third quarter, heading for its biggest gain since the first three months of 2011. Gasoline, corn and wheat advanced more than 5 percent today to lead gains among 18 of the 24 commodities tracked by the index.

Gasoline rose to a five-month high, surging 6.3 percent to $3.342 a gallon in New York, as refinery maintenance in the Atlantic Basin stoked concerns about supplies in New York Harbor. Refineries in Canada, Wales and the Netherlands that supply the U.S. East Coast reduced fuel production. Supplies in the region, which includes New York Harbor, the delivery point for futures contracts, are the lowest in almost four years, Energy Department data show.

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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