Stocks plunged from Shanghai to New York, with the Standard & Poor’s 500 Index tumbling below its lowest closing level of the year, and Treasury two-year note yields slid to a record low on concern over weakening growth in China and a slump in U.S. consumer confidence.
The S&P 500 slid 2.6 percent to 1,046.95 at 2:18 p.m. in New York, its lowest on a closing basis since November 2009. The MSCI World Index of 24 developed nations lost 2.9 percent, while the Shanghai Composite Index tumbled 4.3 percent. The benchmark 2012 Treasury note yield slid as low as 0.5857 percent and the 10-year yield dipped below 3 percent for the first time in 14 months. Oil and copper slumped at least 3.4 percent.
“It’s ugly out there,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “Consumers are pulling back. There’s concern about a China slowdown. We’re close to important technical levels on the S&P 500, with 1,040 being closely watched. It’s end of quarter, investors have to close their books and they are selling the stocks that did poorly.”
The tumble in global stocks began after the Conference Board said its leading economic index for China rose 0.3 percent in April, less than the 1.7 percent reported June 15. Losses accelerated after the same research group’s gauge of U.S. consumer confidence slumped to 52.9 in June, less than all 71 projections in a Bloomberg News survey of economists. The S&P 500 has tumbled 11 percent since the end of March, headed for its first quarterly loss in a year.
Jobs, Europe Concerns
Today’s data damaged investor confidence amid concern a Labor Department report July 2 will show the U.S. lost jobs for the first time this year, while European bank balance sheets come under heightened scrutiny as a lending facility from the region’s central bank expires.
The rate banks say they charge each other for three-month loans in euros rose to 0.688 percent in London, the highest in eight months, as institutions hoarded cash before the 12-month European Central Bank lending facility expires later this week.
European banks need to repay 442 billion euros ($540 billion) in 12-month loans to the ECB by July 1, the biggest amount ever awarded by the central bank. Demand for three-month cash from the ECB tomorrow will expose how much banks still rely on the central bank for funding, investors and economists said. The ECB will announce how much money banks have asked for at about 11:15 a.m. in Frankfurt.
‘Funding Pressures’
“Concerns about funding pressures are creeping in again,” said Alexander Titsch-Rivero, head of derivatives and structured products in Frankfurt at BHF-Bank AG, a German private bank. “Some banks seem to be concerned about the ECB’s 12-month loans expiring. Definitely some banks seem to have built up huge bond positions financed with this one-year ECB tender. Now you have a roll-over gap and that seems to make people nervous.”
The S&P 500, the benchmark gauge for U.S. stocks, retreated for the sixth time in seven days even after a report showed home prices in 20 U.S. cities rose in April from a year earlier as sales got a boost from a tax credit. The S&P/Case-Shiller index of property values climbed 3.8 percent from April 2009, the biggest year-over-year gain since September 2006. The gain topped the median forecast of economists in a Bloomberg survey.
All but five stocks in the S&P 500 fell, while 99 companies in the Nasdaq 100 Index were lower. Among 24 industry groups in the S&P 500, none had a loss smaller than 1.1 percent, according to data compiled by Bloomberg.
Dow Below 10,000
Boeing Co., Alcoa Inc. and Caterpillar Inc. tumbled at least 4.8 percent to lead losses in all 30 Dow Jones Industrial Average companies as the 30-stock gauge slid 260.05 points to 9,878.47, its first trip below 10,000 in more than two weeks.
Tesla Motors Inc., the electric car company that hasn’t posted a profit, advanced as much as 19 percent after raising $226 million in the first initial public offering of a U.S. automaker in a half century.
All 10 industry groups in the MSCI World Index declined at least 1.8 percent, led by basic-materials producers and financial companies. The gauge has lost 10 percent this year. The MSCI Asia Pacific Index dropped 1.5 percent today as Japan’s unemployment rate unexpectedly increased.
The New York-based Conference Board cited a calculation error for the revision in its Chinese index. The research group’s outlook for the nation’s economy hasn’t been affected by the correction, said William Adams, the group’s resident economist in Beijing.
“Growth was not likely to accelerate in China, and in fact, a moderation is possible,” Adams said in a telephone interview. “This correction also supports the same view.”
Treasuries Rally
The yield on the 10-year Treasury security slid as much as 7 basis points to 2.95 percent, the lowest since April 2009. Treasuries have climbed 5.7 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The 10-year Australian bond yield dropped nine basis points to 5.13 percent, and the yield on the 10-year German bund retreated three basis points to 2.55 percent.
Indicators of corporate bond risk in the U.S. and Europe rose. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, climbed 5.53 basis points to a mid-price of 121.5 basis points as of 11:49 a.m. in New York, the highest since June 14, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings increased 8.74 to 133.27, the biggest rise since June 7, Markit prices show.
Yen, Dollar
The yen appreciated against all 16 major currencies and the dollar strengthened against 14 on demand for assets perceived to be the safest. Japan’s currency appreciated 1.7 percent to 107.89 per euro and touched 107.32 yen per euro, the strongest since November 2001.
Metals declined for the first time in four sessions on the London Metal Exchange, led by declines of more than 7 percent in zinc, nickel and lead. Copper fell 4.9 percent to $2.9375 a pound in New York, extending its decline this year to 13 percent. Oil for August delivery slumped 3.4 percent to $75.57 a barrel on the New York Mercantile Exchange.
The MSCI Emerging Markets Index fell 2.9 percent, the most since May 25, extending this year’s drop to 6.6 percent.
The Stoxx Europe 600 Index tumbled 3 percent as Rio Tinto Group, the world’s third-biggest mining company, plunged 6.4 percent on concern demand from China may weaken. BP Plc lost 1.7 percent in London, bringing its decline since an April explosion on the Deepwater Horizon rig to more than 50 percent.
The cost of insuring BP’s debt approached a record, with credit-default swaps increasing 3.5 basis points to 587.4, according to CMA DataVision, a London-based credit information provider. The contracts closed at an all-time high of 588.6 on June 25.
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