U.S. stocks fell, paring a monthly advance, while Treasuries rose after May economic data raised concern over the strength of the American economy following a first-quarter contraction. European shares sank the most since April.
The Standard & Poor’s 500 Index lost 0.6 percent at 4 p.m. in New York, capping its first weekly drop in four. The Stoxx Europe 600 Index fell 1.7 percent in its worst day since April 29. The yield on 10-year Treasury notes dropped one basis point to 2.12 percent. Oil capped an 11th weekly gain, the longest streak since futures trading began in 1983.
The U.S. economy contracted 0.7 percent in the first quarter, adding to evidence the Federal Reserve won’t be in a hurry to raise interest rates even as officials believe the setback in growth was temporary. Separate data Friday raised concern the recovery isn’t as robust as forecast, as the May reading on the Chicago business activity index unexpectedly fell and consumer confidence decreased to a six-month low.
“GDP is kind of an old story -- we already knew it contracted, but the Chicago PMI number came in unexpectedly low,” Kevin Caron, a market strategist and portfolio manager who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey. “It could be that the market was hoping for a better number, and didn’t get the support it wanted. There’s conflicting data on the strength of the economy.”
The S&P 500 has advanced 1.2 percent this month, closing at a fresh record on May 21. The Nasdaq Composite Index and the Dow Jones Industrial Average also rose to all-time highs in May.
The Institute for Supply Management-Chicago Inc.’s business barometer fell to 46.2 in May from 52.3 the prior month. Consumer confidence in the U.S. fell to a six-month low in May as Americans became less sanguine about the prospects for the economy.
“The Chicago PMI headline was exceedingly soft,” said Mark Luschini, chief investment strategist in Philadelphia at Janney Capital Management LLC, which oversees about $68 billion. “Investors are chalking up softer economic data to a lot of anomalous factors in the first quarter, but this was a May read. That collectively is weighing on the markets at a time when there’s no impetus to buy.”
German and French stocks dragged European shares to their biggest decline in a month amid investor concern Greece won’t reach an agreement with creditors in time for a debt repayment.
U.S. government securities headed for the first weekly advance in more than a month, signaling that the worst of their selloff may be over. Stocks and bonds have been recovering from losses earlier this month as concern eased over the pace of inflation and traders aren’t predicting more than one rate increase any time soon.
“We really need to get a sense of the strength of the U.S. economy, or at least an assurance that we’re not in for a more serious slowdown,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “It’s been a bit tricky this month with a number of worries in the market -- everything from concerns about the Fed and the weakness in the U.S. economy, to a very rapid rise in European interest rates and problems in Greece.”
While all sovereign-debt markets tracked by Bloomberg World Bond Indexes made a loss in the past month, signs of strength emerged this week. Germany’s 10-year bunds continued to stabilize after a selloff that sent rates surging 70 basis points. The bund yield dropped five basis points to 0.49 percent Friday. Italy’s 10-year yield fell one basis point to 1.85 percent on Friday.
Emerging-market stocks headed for their worst month this year and currencies weakened amid concern the Fed is close to raising interest rates, dimming the appeal of riskier assets. The MSCI Emerging Markets Index dropped 0.6 percent Friday, capping a 4.2 percent drop in May.
West Texas Intermediate crude rose 4.5 percent to settle at $60.30 a barrel for the biggest advance in six weeks. Prices were up 1 percent in the week and 1.1 percent in May.