By Rita Nazareth - Oct 6, 2011 8:31 PM GMT+0700
U.S. stocks fell, following the biggest two-day gain for the Standard & Poor’s 500 Index in a month, after European Central Bank President Jean-Claude Trichet said the euro-area economy faces “intensified downside risks.”
The S&P 500 dropped 0.1 percent to 1,143.45 at 9:30 a.m. New York time. U.S. stocks rallied yesterday as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis.
There are “intensified downside risks” to the economic outlook, Trichet said at a press conference in Berlin today. “Ongoing tensions in financial markets and unfavorable effects on financing conditions are likely to dampen the pace of economic growth in the euro area in the second half of this year.”
Trichet said the ECB will resume covered-bond purchases and reintroduce yearlong loans for banks as the sovereign debt crisis threatens to lock money markets. ECB policy makers left the benchmark interest rate at 1.5 percent, resisting calls to reverse its two rate increases this year.
The European Commission is proposing coordinated action to recapitalize banks, according to Commission President Jose Barroso. The Bank of England pledged to buy the most bonds since the depths of the last financial crisis as officials raced to stop the euro-region debt turmoil from pushing the economy back into recession.
Stock futures extended gains earlier as U.S. Labor Department figures showed applications for jobless benefits increased by 6,000 in the week ended Oct. 1 to 401,000. Economists projected 410,000 claims, according to the median estimate in a Bloomberg News survey. The monthly average dropped to the lowest level since the end of August.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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