Stocks fell, while the euro weakened for a third day against the yen, as reports showed Spain entered its second recession since 2009 and U.S. business activity cooled. Treasuries and German bunds advanced.
The Standard & Poor’s 500 Index lost 0.4 percent to 1,397.91 at 4 p.m. in New York and snapped its longest streak of monthly gains since 2009. The Stoxx Europe 600 Index declined 0.7 percent. The euro weakened 0.7 percent versus the yen. Ten- year Treasury yields decreased one basis point to 1.92 percent and the rate on similar-maturity German bunds declined four points to 1.66 percent, approaching last week’s record low of 1.63 percent. Oil slipped 6 cents to $104.87.
Spain’s gross domestic product fell 0.3 percent in the first quarter, the government said today as it struggles to narrow a budget deficit by 3.2 percentage points of GDP. U.S. consumer spending rose 0.3 percent in March, according to Commerce Department data, while an Institute for Supply Management-Chicago Inc. report showed business activity expanded in April (SPX) at the slowest pace since 2009.
“We see a shift out of risk assets,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “Europe is still considerably weak. We’re in a recovery albeit a tepid one. Expectations have gotten too high.”
Monthly Rally in Jeopardy
The S&P 500 extended its April retreat to 0.7 percent. The index snapped a string of four monthly gains, its longest streak in more than two years. The Dow Jones Industrial Average lost 14.68 points, or 0.1 percent, to 13,213.63 to trim its monthly advance to 0.01 percent. The 30-stock Dow capped its seventh straight monthly advance, the longest streak since 2007.
Humana Inc. (HUM:US), the second-biggest provider of U.S.-backed Medicare insurance, retreated 8.1 percent today as profit declined. Barnes & Noble Inc. (BKS:US) soared 52 percent, its biggest gain ever, after Microsoft Corp. said it will invest $300 million in a venture with the bookstore chain.
NYSE Euronext fell 4.9 percent after reporting a 44 percent decline in earnings. VeriFone Systems Inc. slipped 12 percent as the largest maker of credit-card terminals was cut to sell from hold by Deutsche Bank AG.
Takeover news lifted some stocks, limiting the overall market’s retreat. Sunoco Inc. (SUN:US) climbed 20 percent after the refiner agreed to be acquired for $5.3 billion in shares and cash by Energy Transfer Partners LP. Gen-Probe Inc. (GPRO:US) surged 19 percent as Hologic Inc. agreed to buy the company for about $3.7 billion. Monster Beverage Corp. (MNST:US) jumped as much as 28 percent after the Wall Street Journal reported Coca-Cola Co. is in talks to buy the maker of energy drinks, then erased the gain to close down 0.8 percent after Coca-Cola denied the report.
Stocks retreated as the ISM-Chicago’s business barometer decreased to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey. Readings greater than 50 signal growth. Economists projected the gauge would fall to 60, according to the median of 55 estimates in the survey. The Federal Reserve Bank of Dallas’ general economic index unexpectedly showed contraction in April, dropping to minus 3.4 from 10.8 in the prior month.
Household purchases, which account for about 70 percent of the economy, increased for a ninth month after a revised 0.9 percent gain the prior month that was stronger than first reported, Commerce Department figures showed. The median estimate of 72 economists surveyed by Bloomberg News called for a 0.4 percent rise. Personal incomes rose 0.4 percent, more than the median forecast.
Quarterly earnings-per-share have risen 6.7 percent for the 276 companies in the S&P 500 that reported since April 10, with per-share results beating analyst estimates by 7 percent, according to data compiled by Bloomberg. Before the start of the earnings season, analysts forecast growth of 0.8 percent.
Analysts predict U.S. shares will rise enough this year to boost the S&P 500 to a record, even as Wall Street strategists say the best is already over for American equities.
Individual price forecasts for stocks show the combined projection for the benchmark gauge has climbed to 1,569.74, according to more than 10,000 analyst estimates compiled by Bloomberg. That compares with the October 2007 high of 1,565.15. At the same time, strategists who base their predictions on assessments of the economy say this year’s 11 percent rally represents all the gains investors will see.
Today’s decline in the Stoxx 600 extended this month’s drop to 2.3 percent, its worst since September. Spain’s IBEX Index (IBEX) lost 1.9 percent today as S&P cut its credit ratings for 11 Spanish banks.
“It will become increasingly difficult for Spain to fulfill its deficit target and that will be a risk factor for the euro zone and the euro,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “It’s not something that’s going to disappear in the short term.”
Luxemburg Prime Minister Jean-Claude Juncker said he is leaving the job as head of the euro group within the European Union as he is tired of Franco-German interference in managing the crisis.
“They act as if they are the only members of the group,” in managing the debt crisis, he said at a podium discussion held today in Hamburg.
Global stocks rallied earlier after Adidas AG, Bank of Communications Co. and Samsung Heavy Industries Co. posted better-than-estimated earnings.
Adidas climbed 5.3 percent after the sporting-goods maker raised its 2012 profit forecast and reported a 38 percent jump in first-quarter net income, fueled by golf sales and growth in China. Actelion Ltd. (ATLN) jumped 14 percent, its largest gain since going public in 2000, as its experimental lung drug macitentan met the main goal of a late-stage clinical trial, giving the company a possible successor to a treatment that accounts for 89 percent of sales.
The euro declined 0.1 percent to $1.3239. The Australian dollar depreciated 0.4 percent against the greenback, and fell 1 percent versus the yen on speculation the nation’s central bank will reduce interest rates tomorrow. The Dollar Index, a gauge of the currency against six major peers, rose 0.1 percent to halt a four-day retreat.
The MSCI Emerging Markets Index (MXEF) added 0.6 percent, paring this month’s slide to 1.5 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks advanced 1.6 percent and South Korea’s Kospi Index rose 0.3 percent.
Cocoa, cotton, silver and nickel lost at least 1 percent to lead declines in 10 of 24 commodities tracked by the S&P GSCI Index, while natural gas and coffee rallied to leave the gauge little changed.
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