Stocks, Spain Bonds Slip as Crops Lead Commodities Lower

European Stocks, Copper Fall
A visitor watches as stock price information on Spain's IBEX 35 is displayed on an electronic screen inside the Madrid stock exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

U.S. benchmark stock indexes fell from almost five-year highs and Spanish bonds slid after finance chiefs deadlocked at euro-area debt-crisis talks and New York manufacturing slumped. Oil plunged, extending losses in commodities and shares of energy producers.

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,461.19 at 4 p.m. in New York. China’s Shanghai Composite Index sank 2.1 percent amid concern the world’s second-largest economy is slowing and as tensions with Japan escalated. The euro slipped 0.1 percent to $1.3111 after rising more than 0.3 percent earlier. Spain’s 10-year yield briefly climbed above 6 percent for the first time in a week and its two-year yield surged 20 basis points. Corn, soybeans and wheat lost more than 4 percent and oil tumbled 2.4 percent, the most in eight weeks.

EU ministers failed to agree on a timetable for a more unified banking sector and clashed over terms of bailout requests and the role of the European Central Bank at a meeting Sept. 14 in Cyprus. A Federal Reserve report showed manufacturing in the New York region contracted at the fastest pace since 2009, underscoring concerns about the economy that prompted the central bank to announce plans to buy mortgage securities last week.

“There was disappointment in Europe, the finance ministers met over the weekend and did not come to an agreement on bank regulation, which is fairly significant,” John De Clue, the Minneapolis-based regional investment director at U.S. Bank Wealth Management, which oversees $80 billion, said in a telephone interview. “People are waiting and watching now to see will this Federal Reserve action have the legs of the past or not. It’s difficult to say.”

Market Movers

The S&P 500 and Dow Jones Industrial Average retreated from the highest levels since December 2007. The Fed Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of economists in a Bloomberg survey called for a minus 2 reading in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Gauges of raw-material, energy and financial companies led losses among the 10 main groups in the S&P 500 today, dropping at least 0.8 percent each.

Netflix Inc. fell 5.8 percent today after the world’s largest video-subscription service was rated underperform in new coverage at Macquarie Capital USA Inc. Boeing Co. retreated 1.9 percent as Oppenheimer & Co. analyst Yair Reiner said the shares of the world’s largest maker of cargo aircraft may fall, citing GEnx engine issues after one cracked on a Boeing 787 Dreamliner during testing on July 28, spewing hot metal parts.

Apple Climbs

Apple Inc. climbed for a fourth straight day, rising 1.2 percent, after pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device. Because demand for the iPhone 5 exceeds the initial supply, some pre-orders will be delivered to customers in October, rather than September as previously planned, Apple said today in a statement.

Two shares fell for every one that advanced in the Stoxx Europe 600 Index, which lost 0.3 percent after closing at the highest level since June 2011 last week. SSAB sank 6.9 percent, the most in seven months, as the Swedish steelmaker said demand for strip products has been much weaker than expected.

Spanish 10-year bonds declined, with the yield rising as much as 22 basis points to 6.01 percent before trimming its gain and trading at 5.97 percent. The nation’s debt agency said it planned to sell 4.5 billion euros ($5.9 billion) of three- and 10-year debt on Sept. 20. The rate on 10-year Italian debt increased nine basis points to 5.11 percent. Yields on 10-year German bunds fell three basis points to 1.67 percent.

ECB Governing Council member Luc Coene said rising bond yields may force Spain into asking for aid and agreeing to the ECB’s conditions for granting it. If “markets see that Spain will not” ask for aid, “then it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” Coene said at a panel discussion in London today.

‘Ultimate Endgame’

“The euro area finance ministers meeting has come and gone, and despite the indication of willingness by the ECB to buy bonds, we are still no closer to what many in the market consider the ultimate endgame,” said Brian Barry, an analyst at Investec Bank Plc in London. “Until we reach a position where their resolve to contain yields can be tested, yields could continue to drift higher.”

Swaps, Commodities

The cost of insuring European corporate debt using credit-default swaps rose from a 13-month low. The Markit iTraxx Crossover Index of contracts tied to 50 mostly junk-rated companies climbed eight basis points to 468, gaining from the lowest level since Aug. 1, 2011.

Oil dropped the most in eight weeks, declining more than $3 in less than a minute in late trading, as October options were about to expire. Oil for October delivery fell $2.38, or 2.4 percent, to settle at $96.62 a barrel on the New York Mercantile Exchange. Prices are down 2.2 percent this year. The decline was the largest since July 23.

CME Group Inc. did not suffer any technical issues during the afternoon plunge in crude oil, gasoline and heating oil on the NYMEX, said Chris Grams, a spokesman for CME.

Soybean futures plunged the maximum allowed by the Chicago Board of Trade on speculation that rain will aid planting and early crop development in South America. Corn dropped the most since May.

Zinc and aluminum fell more than 1.2 percent. The S&P GSCI gauge of 24 commodities declined 2.3 percent after jumping 1 percent on Sept. 14 to the highest settlement since April 2.

Bullish commodity wagers rose to a 16-month high just before the Fed’s pledge for more stimulus drove prices to a seventh weekly advance and banks from HSBC Holdings Plc to Citigroup Inc. forecast more gains.

Hedge funds and other speculators lifted their net-long positions across 18 U.S. futures and options by 0.3 percent to 1.33 million contracts in the week ended Sept. 11, the most since May 2011, U.S. Commodity Futures Trading Commission data show. Copper holdings surged 25-fold to 17,509 contracts, the biggest gain on record. Gold bets climbed to the highest since Feb. 28, and silver wagers advanced for a seventh week.

The MSCI Emerging Markets Index retreated 0.2 percent after climbing for a seventh day on Sept. 14, the longest run of gains in 11 months. Citigroup Inc. cut its 2013 Chinese economic growth forecast, while a dispute with Japan over islands claimed by both nations led to public protests in a dozen cities.

India’s Sensex index rose 0.4 percent after the central bank unexpectedly cut lenders’ reserve requirements and the government said last week it will open its retail and airline industries to foreign investors.

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