U.S. Stocks Pare Loss After Japan Leads Global Slump

The Standard & Poor’s 500 Index recovered most of a 1.2 percent morning slide as Hewlett-Packard Co. led gains in technology shares. Global equities slid, with Japanese shares plunging the most since the aftermath of the Fukushima disaster. Copper sank and the yen rallied.

The S&P 500 fell less than 0.3 percent at 4 p.m. in New York after decreasing 0.8 percent yesterday. The MSCI All-Country World Index declined 1.3 percent and Japan’s Topix Index slumped 6.9 percent, the most since March 2011. The yen rose against its 16 major peers, gaining 1.3 percent to 101.84 per dollar. Ten-year Treasury yields lost 2.5 basis points to 2.01 percent after topping 2 percent yesterday for the first time since March. Copper sank more than 2 percent in London, leading commodities lower.

Hewlett-Packard jumped 17 percent, the most since 2001, as cost cuts helped its earnings and forecast top estimates. The drop in global stocks came as factory output in China shrank for the first time in seven months and overseas investors reacted to growing concern the U.S. Federal Reserve will scale back its monetary stimulus program. Fed Bank of St. Louis President James Bullard said today he wants to continue the current pace of bond purchases as long as falling inflation is a concern.

The swing in stocks “really shows the nervousness in the marketplace that at any given time a piece of exogenous news can quickly change the psychology,” Rick Bensignor, head of trading strategy at Wells Fargo Securities LLC in New York, said in a phone interview. “But you’re going to have your confirmed bulls that will use any pullbacks at all to buy. There is enough of the Street that thinks that the S&P 500 has a few more hundred points to go.”

Fed Watch

While Fed Chairman Ben S. Bernanke said in prepared remarks to Congress yesterday that a premature withdrawal of stimulus would put the economic recovery at risk, he later told lawmakers that the central bank will reduce the flow of purchases as the outlook for the labor market improves.

The S&P 500 lost about 1.1 percent in two days, its biggest retreat in more than a month. Utilities in the index tumbled 2.4 percent in the past two sessions as yesterday’s jump in bond yields reduced demand for their dividends. Utilities pay 3.8 percent of their price in dividends for the second highest yield among 10 groups, according to data compiled by Bloomberg.

NYSE Euronext let stand trades that sent American Electric Power Co. and NextEra Energy Inc. down at least 54 percent, while labeling them as “aberrant” and excluding them from records showing the stocks’ lows of the day.

American Electric Power fell as much as 54 percent to $22.28 a share, according to data compiled by Bloomberg. The shares rebounded, trimming the loss to 0.6 percent and closing at $48.28. NextEra Energy, another electricity supplier, sank as much as 62 percent to $30.37 before bouncing back to pare the day’s drop to 1.2 percent and closing at $78.22.

‘Key Reversal’

Yesterday’s 0.8 percent drop in the S&P 500 may signal a “garden variety correction” that will result in a 6 percent to 9 percent retreat in the index, according to Oppenheimer & Co. technical analyst Carter Worth. The drop met the requirements of being a “key reversal day,” as well as an “outside day” because both the session’s high and low points exceeded those of the previous day. Outside days and key reversal days signal changes in direction more often than not, he wrote.

U.S. stocks pared losses today as government data showed sales of new homes climbed 2.3 percent to a three-month high of 454,000 homes at an annualized pace from a 444,000 rate in March that was faster than first estimated. The median estimate of 76 economists surveyed by Bloomberg called for a gain to 425,000. The median selling price rose to a record on sales of more expensive properties. A gauge of 11 homebuilders in S&P indexes jumped 1 percent.

Jobless Claims

Jobless claims decreased more than forecast, falling by 23,000 to 340,000 in the week ended May 18, Labor Department figures showed. The median forecast of 50 economists surveyed by Bloomberg called for a drop to 345,000.

The Stoxx Europe 600 Index retreated from the highest level in almost five years, sliding 2.1 percent for the biggest drop since July. Trading volume was 24 percent more than the 30-day average as all 19 industry groups retreated. HSBC Holdings Plc, Europe’s biggest bank, sank 3.4 percent. Daimler AG, the world’s third-largest maker of luxury vehicles, lost 3.3 percent.

Topix Drops

The drop in Japanese shares erased $314 billion in market value amid record volume, shaking bulls who pushed the Topix Index to five-year highs and highlighting their vulnerability to shocks at home and abroad.

This year’s best performing major equity gauge plunged after government bond yields rose to the highest levels in a year and Chinese manufacturing missed estimates. The slide triggered a halt in Osaka-traded index futures and cut the measure’s 2013 advance to 38 percent from 48 percent. Gains for the Topix remain more than twice as big as the S&P 500’s this year.

JPMorgan Asset Management and Pinebridge Investments LLC said the selloff was overdue after $1.2 trillion was added to equities on speculation Prime Minister Shinzo Abe and the Bank of Japan would end two decades of deflation. The Topix traded at as much as 24.8 times earnings this week, higher than 86 percent of days since 2004, data compiled by Bloomberg show. Mark Matthews, who helps oversee $282 billion as head of Asia research at Bank Julius Baer & Co., said the rally will resume.

Japan, Emerging

For the first time since April 2005 every company in the Nikkei 225 Stock Average fell, dragging the gauge down 7.3 percent. Nikkei 225 futures traded in Osaka were up 0.1 percent in the May 24 session.

The MSCI Emerging Markets Index sank the most in 10 months, losing 2 percent. Russia’s Micex Index slid 3.6 percent, the biggest drop in a year, while Brazil’s Ibovespa closed little changed.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 2.8 percent, the most in six weeks. The preliminary reading of 49.6 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final 50.4 for April. The number was also below the 50.4 median estimate in a Bloomberg News survey of 13 analysts. A reading above 50 indicates expansion.

Oil Falls

West Texas Intermediate oil closed little changed in New York, slipping 3 cents to $94.25 a barrel, while copper dropped 2.3 percent in London. China is the biggest buyer of industrial metals and energy. The S&P GSCI gauge of commodities declined 0.2 percent, the third consecutive drop. Gold futures climbed 1.8 percent to $1,391.80 an ounce.

The yen climbed as much as 2.3 percent against the dollar, the most since Feb. 25. It reached a 4 1/2 year low of 103.74 per dollar yesterday. Japan’s currency gained 0.7 percent to 131.73 per euro.

The Swiss franc pared gains after climbing as much as 1.3 percent against the euro, the most since Sept. 5, 2011, the day before the Swiss National Bank imposed its currency floor.

Spain’s 10-year bond yield climbed 11 basis points to 4.29 percent. Borrowing costs increased as the government sold 4.08 billion euros ($5.26 billion) of debt maturing in 2016, 2018 and 2026.