Stocks Drop, Treasuries Rise on Greece, Fiscal Cliff

Treasuries Climb With Dollar as European Stocks Pare Advance
The dollar advanced against all but three of its 16 major peers. Photographer: Kiyoshi Ota/Bloomberg

U.S. stocks fell, sending the Standard & Poor’s 500 Index to the biggest two-day drop of the year, and Treasuries rose as investors speculated Greece’s bailout will be delayed and that President Barack Obama’s re-election endangers tax breaks for investors. The euro slid.

The S&P 500 slid 1.2 percent to 1,377.51 as of 4 p.m. in New York, the lowest level in three months. The MSCI Emerging Markets Index lost 1.2 percent. The euro weakened 0.2 percent to $1.2747 and touched a two-month low. The yield on the current 30-year U.S. bond dropped eight basis points to 2.75 percent. The S&P GSCI gauge of 24 raw materials added 0.4 percent as oil, gold and silver rallied.

Stocks have tumbled since the re-election of Obama and a split Congress on concern they’ll be unable to compromise and avoid a series of changes that have become known as the fiscal cliff. Euro-area finance ministers will await a full report on Greece’s compliance with the terms of its bailout, a European Union official said.

“The clock is really ticking,” Richard Sichel, who oversees $1.8 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “Every time you think the European situation is ready to go on the right direction, there’s a setback along the way. Those things are not being reversed as quickly as we would like to see.”

The Dow Jones Industrial Average retreated 0.9 percent to 12,811.32, the lowest since July. In the S&P 500, energy, financial and technology shares had the biggest declines in the past two days, falling at least 4.2 percent.

Presidential Victories

Obama’s presidential victories have preceded the two biggest post-Election Day selloffs on record, according to data compiled by Bloomberg starting in 1896. The Dow’s 9.7 percent plunge in the two days after he won his first term in 2008 came at the height of the credit crisis that erased $11 trillion from American equity values. This year’s two-day drop ranks second.

The Dow lost 32 percent from Election Day in 2008 to its 12-year low of 6,547.05 on March 9, 2009. From there it rallied 96 percent, handing Obama the biggest gain for any first term president since Bill Clinton, data compiled by Bloomberg show.

Apple Inc. lost 3.6 percent, extending its decline since its Sept. 19 high to 23 percent. McDonald’s Corp., the world’s largest restaurant chain, dropped 2 percent after its monthly store sales declined for the first time in nine years.

The Congressional Budget Office released a report today reaffirming its previous projections that allowing the scheduled tax increases and automatic spending cuts to take effect would lead to a recession in the first half of 2013. Congress returns to Washington next week for a post-election session that will focus on the fiscal cliff.

Interest Rates

The euro fell 0.9 percent to 101.22 yen after sliding 0.8 percent yesterday. Europe’s central bank left its benchmark interest rate at 0.75 percent at its policy meeting in Frankfurt today, as forecast by all except one of 63 economists surveyed by Bloomberg News.

“You have a Greek political situation that looks more tenuous than it did 48 hours ago and you have European ministers who will potentially hold off giving aid to them until later this month,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “It makes for increased market uncertainty.”

Greek Prime Minister Antonis Samaras mustered support in Parliament to approve austerity measures needed to unlock bailout funds, in a tense vote that weakened his majority after the expulsion of seven dissenting lawmakers. European Central Bank President Mario Draghi said the region’s economy may remain “weak.”

Commodities Rally

Oil rose 0.8 percent to $85.09 a barrel in New York. It rebounded from a 4.8 percent drop yesterday, the most since Dec. 14, after President Barack Obama won re-election. Copper added 0.8 percent.

Gold futures for December delivery rose 0.7 percent to settle at $1,726 an ounce in New York. Prices have jumped 10 percent this year. Silver futures for December delivery advanced 1.8 percent to $32.24 an ounce.

Fewer Americans than forecast filed claims for unemployment insurance last week as the effects of Hurricane Sandy started to show up. Applications for jobless benefits fell by 8,000 to 355,000 in the week ended Nov. 3, the Labor Department said. Economists forecast claims would be little changed from the prior week at 365,000, according to the median estimate in a Bloomberg survey.

Spain’s 10-year bond yield climbed 16 basis points to 5.85 percent. The nation sold 4.76 billion euros ($6.1 billion) of bonds, more than its maximum target.

The MSCI All-Country World Index retreated 1 percent. The Shanghai Composite Index fell 1.6 percent as China’s leadership congress began today, and South Korea’s Kospi Index slumped 1.2 percent after GS Engineering & Construction Corp. said profit tumbled. India’s Sensex lost 0.3 percent,

Before it's here, it's on the Bloomberg Terminal. LEARN MORE