Stocks fell as Germany’s DAX Index (DAX) plunged 4 percent in 15 minutes amid concern regulators may impose more restrictions on short selling. The dollar, Treasurys and Bank of America Corp.’s shares rallied.
The Standard & Poor’s 500 Index dropped 1 percent at 12:05 a.m. in New York. The Stoxx Europe 600 Index lost 1.2 percent after rising as much as 1.1 percent. The DAX retreated 1.7 percent as of the close of trading in Frankfurt. The Dollar Index jumped 0.3 percent. Treasurys rose, driving yields on 10- year notes down seven points to 2.23 percent.
Investors speculated that Germany would impose a short- selling ban, said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management Inc. in Chicago. Germany’s Finance Ministry said the speculation was incorrect. U.S. equities slumped after American jobless claims increased.
“All eyes are of course on the German stock market selloff,” Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, wrote in an e-mail. “It seemed to come out of nowhere.”
When U.S. exchanges opened, the S&P 500 advanced as much as 1.1 percent after Warren Buffett’s Berkshire Hathaway Inc. agreed to invest $5 billion in Bank of America, which had plunged 53 percent in 2011. The stock rallied 11 percent. At the same time, Nasdaq-100 Index futures erased losses that had been driven by Steve Jobs resigning as Apple Inc.’s chief executive officer. Apple shares lost 1.1 percent.
Declines in stocks intensified at about 9:45 a.m. New York time. The DAX dropped from about 5,681, yesterday’s closing level, to 5,451.52 at 10:01 a.m. A report at 8:30 a.m. showed an increase in American jobless claims that economists didn’t anticipate.
Nobel-prize winning economist Joseph Stiglitz said the chances of the U.S. economy going back into recession are “very high,” speaking at a conference today in Lindau, Germany. The city of Harrisburg, Pennsylvania, said it may miss a $3.3 million bond payment on Sept. 15.
“It’s such a mishmash,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. “You have Buffett investing in Bank of America, which is a bet on the U.S. economy. Still, the employment picture is not a good one,” he said. “Then, there’s the European debt crisis. If global growth slows, that could be more of an issue.”
Investors are awaiting a speech by Federal Reserve Chairman Ben S. Bernanke in Jackson Hole, Wyoming, tomorrow for any indications of whether the central bank will embark on further stimulus.
“The markets have been very sensitive to every piece of economic data,” Keith Wirtz, the Cincinnati-based chief investment officer at Fifth Third Asset Management, which oversees $16.7 billion, said in a telephone interview. “You still got an indication that we have a poor labor market. When it comes to Jackson Hole, the sentiment has been all over the place. It seems that the recent stock performance has been supported by expectations of QE3. If there’s no indication tomorrow, this market may retrace.”
Before Buffett’s Bank of America investment drove equities higher, stock futures erased gains after jobless claims climbed by 5,000 to 417,000 in the week ended Aug. 20, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. Claims were pushed up for a second time by a labor dispute at Verizon Communications Inc.
Data tomorrow may indicate the world’s biggest economy grew 1.1 percent in the second quarter, down from a previous estimate of 1.3 percent, according to the median of 80 forecasts in a separate survey.
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