Treasuries Halt Two-Day Drop; Stocks Decline, Yen Rises

Treasuries rose, halting a two-day retreat, as record Spanish unemployment fueled concern Europe’s debt crisis will worsen. Most U.S. stocks fell amid better-than- forecast economic growth and disappointing earnings.

Ten-year Treasury yields decreased eight basis points to 1.75 percent at 4 p.m. in New York. The yen strengthened against 15 of 16 major peers, while the euro trimmed earlier losses to trade little changed at $1.2935. The Standard & Poor’s 500 Index lost 0.1 percent to 1,411.94 after earlier tumbling as much as 0.7 percent. About eight stocks declined for every five advancing on U.S. exchanges.

Treasury 10-year yields retreated from near the highest level in five weeks as Spain’s unemployment, the second-highest in the European Union after Greece, rose to 25.02 percent from 24.6 percent in the previous quarter, the National Statistics Institute said. The U.S. economy grew at a 2 percent annual rate, Commerce Department data showed, topping the median economist forecast for a 1.8 percent gain.

“You’re getting a mix of data that don’t have a clear direction,” said Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion. “It’s important for investors’ psychology to see GDP data beating estimates.”

Two-year Treasury yields decreased one basis point to 0.30 percent, while 30-year rates lost seven basis points to 2.91 percent. The Federal Reserve purchased $1.77 billion of longer- term securities as part of its Operation Twist program to boost economic growth, according to the Fed Bank of New York’s website.

Economic Data

Today’s Commerce Department report also showed slower core inflation, producing positive real 10- year note yields for the first time since 2011. gains by 46 basis points. Inflation measured by the personal consumption expenditures index, a gauge preferred by Fed, rose 1.3 percent in the third quarter from a year earlier, less than the central bank’s goal of 2 percent, according to data from the Commerce Department today in Washington.

The S&P 500 declined 1.5 percent for the week and trading near its lowest level since early September as earnings and economic reports fueled concern that global growth was slowing. Per-share profits declined 0.4 percent and sales fell 1.9 percent for the 273 companies in the S&P 500 that reported results so far as the index headed for the first simultaneous decline in revenue and income since 2009.

Stocks extended losses earlier as German Finance Minister Wolfgang Schaeuble reportedly said there are doubts about whether Greece will be able to meet requirements for its European bailout.

“Doubts persist as to whether Greece has been able to meet its obligations,” Schaeuble said in an e-mail release of an interview be broadcast Oct. 30 on ZDF television. These doubts have to be dispelled from now on.’’

‘Frankenstorm’

The S&P 500 Property & Casualty Insurance Index slipped 0.7 percent. The eight-member gauge has declined for six straight days, its longest losing streak since May. Travelers Cos., the lone insurer in the Dow Jones Industrial Average, lost 0.8 percent, and Allstate Corp. fell 0.9 percent.

Hurricane Sandy, nicknamed “Frankenstorm” by meteorologists because it is forecast to reach the U.S. East Coast near Halloween next week, will cause insured losses of as much as $4.9 billion, Bloomberg Industries analyst Jonathan Adams estimated, citing Kenetic Analysis Corp.

Apple Inc. (AAPL), the world’s largest company by market value, fell 0.9 percent as its earnings report showed the company traded industry-leading margins for a revamped product line in time for the holiday shopping season, a sign of the rising costs of rivalry with Samsung Electronics Co., Microsoft Corp. and Amazon.com Inc. The trade-off was outlined yesterday when Apple said profit in the current quarter will be about $11.75 a share on sales of $52 billion. That compares with $15.49 a share on sales of $55.1 billion predicted by analysts surveyed by Bloomberg.

Earnings Season

Goodyear Tire slumped 10 percent, the most in more than a year on a closing basis, as lower sales in Europe weighed on earnings.

Expedia Inc. (EXPE) climbed 15 percent after the second-biggest online travel agency by market value reported third-quarter earnings that topped analysts’ estimates. Amazon.com, the biggest online retailer, increased 6.9 percent after posting a smaller operating loss than analysts had predicted, suggesting the company is doing a better job managing rising costs.

In Europe, Ericsson AB (ERICB) fell 3.9 percent after the world’s largest maker of mobile-phone networks posted a 43 percent decline in third-quarter profit. Belgacom SA jumped 7.8 percent, the biggest gain since the company went public in 2004, as Belgium’s largest phone company raised its forecasts. Anglo American Plc rose 4.1 percent as Chief Executive Officer Cynthia Carroll stepped down.

European Yields

Spain’s 10-year bond yield fell two basis points to 5.59 percent after increasing seven points earlier. The rate has climbed 22 basis points this week, the most since August. The rate on similar maturity Italian notes increased four basis points to 4.90 percent as the government sold 3 billion euros ($3.9 billion) of zero-coupon debt due in 2014, meeting its maximum target.

The yield on Germany’s 10-year bonds fell five basis points to 1.54 percent.

The MSCI Emerging Markets Index (MXEF) slid 0.9 percent. South Korea’s Kospi lost 1.7 percent as a report showed the economy grew at the slowest pace in three years in the third quarter. Commodity producers led Russia’s Micex Index 0.8 percent lower, Brazil’s Bovespa lost 1 percent and the Shanghai Composite Index sank 1.7 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@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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