Stocks, Oil Drop, Treasuries Gain

Stocks, Oil Drop, Treasuries Gain as Manufacturing Growth Slows

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By Nikolaj Gammeltoft and Stephen Kirkland

July 15 (Bloomberg) -- Stocks tumbled, halting a seven-day rally for the Dow Jones Industrial Average, while two-year Treasury yields fell to a record low and oil dropped as weakening U.S. manufacturing growth overshadowed better-than- estimated earnings.

The Dow declined 75.53 points, or 0.7 percent, to 10,291.19 at 11:40 a.m. in New York to snap its longest streak of gains in four months. China’s Shanghai Composite Index tumbled 1.9 percent, the most in two weeks, after economic growth moderated. Oil retreated below $76 a barrel and the 2-year Treasury yield dipped below 0.58 percent. The euro surged to a two-month high above $1.29 and Spanish bonds rose after a sale of 15-year debt.

All 10 industry groups in the S&P 500 dropped as concern the global economic rebound is slowing overshadowed better-than- estimated earnings at JPMorgan Chase & Co. Treasuries extended gains, sending the 10-year yield below 3 percent, as Federal Reserve data showed manufacturing growth trailed economists’ estimates in the New York and Philadelphia regions in July and production dropped nationwide last month.

“The regional manufacturing data were very weak and there are signs of a global economic slowdown,” said Linda Duessel, who helps oversee $390 billion as equity market strategist at Federated Investors Inc. in Pittsburgh. “Anybody who watches these statistics would bid the stock market down today after the strong rally we’ve had. The question is still whether we will have a double-dip or a slowdown in growth.”

Fed’s Forecast

The Standard & Poor’s 500 Index erased gains in afternoon trading yesterday, snapping a six-day advance, after the Federal Reserve cut its forecast for U.S. growth this year, saying the risks to the outlook “shifted to the downside,” according to the minutes of the central bank’s June meeting released yesterday.

Bank of America Corp., Alcoa Inc. and American Express Co. slumped at least 2.1 percent to lead the drop in the Dow.

JPMorgan, the second-largest U.S. bank, joined Intel Corp. and Alcoa Inc. in posting better-than-estimated earnings in the first week of the second-quarter reporting season. JPMorgan rose as much as 1.2 percent in early trading, only to follow the market lower and drop 2.2 percent.

The Stoxx Europe 600 Index slipped 1.4 percent, led by declines in banks, commodity producers and industrial companies.

Greek lenders rallied, leading the ASE index to a 2.2 percent gain, after Piraeus Bank SA offered to buy stakes in two banks. National Bank of Greece, EFG Eurobank Ergasias SA and Alpha Bank SA rallied more than 5.6 percent as Piraeus Bank submitted a bid to buy “significant stakes” in state- controlled lenders Agricultural Bank of Greece SA and Hellenic Postbank SA. Piraeus Bank jumped 13 percent.

Oil Slips

Crude oil for August delivery lost 1.6 percent to $75.81 a barrel on the New York Mercantile Exchange, erasing an earlier gain of as much as 0.8 percent. Copper for delivery in three months dropped 0.9 percent to $6,665 a metric ton on the London Metal Exchange. China is the world’s largest buyer of the metal.

The euro rose against 15 of 16 counterparts after the Spanish debt auction. The Australian dollar fell against all 15 of 16 major currencies on concern slower growth in China will dent demand for commodities. The yen strengthened against 13.

The yield on Spanish 15-year bonds slipped 15 basis points to 5.07 percent.

Spain sold the full 3 billion euros ($3.8 billion) of 15- year bonds planned, attracting bids for 2.57 times the securities on offer compared with 1.79 at the last auction in April. Italy, Portugal and Greece also raised funds this week after the European Union and International Monetary Fund in May approved a backstop to bolster confidence in the region’s most indebted nations.

China Growth

The Shanghai Composite Index of stocks posted the biggest drop among major emerging markets after the government said gross domestic product rose 10.3 percent in the second quarter, less than the 10.5 percent median estimate in a Bloomberg News survey of 28 economists. The 21-country MSCI Emerging Markets Index fell for the first time in six days, losing 0.6 percent.

Brazilian traders are paring bets for interest rate increases at the fastest pace in two months as the economy shows signs of slowing.

Yields on rate futures contracts due in January 2011 declined 15 basis points, or 0.15 percentage point, in the past two weeks, the most since May, to 11.21 percent. The plunge puts traders’ year-end forecast for the central bank’s benchmark Selic overnight rate at 11.7 percent, below the consensus economist forecast of 12 percent for the first time since at least September, according to data compiled by Bloomberg.