By David Merritt May 13 (Bloomberg) -- U.S. stocks fell on higher-than- estimated jobless claims, disappointing profit forecasts and a report of a widening investigation of banks’ mortgage-bond deals, while the euro dropped on concern governments may not cut budget deficits fast enough to halt the region’s debt crisis. Oil and gold fell, while Treasuries gained. The Standard & Poor’s 500 Index lost 0.1 percent at 9:53 a.m. in New York after yesterday’s rally erased losses from its 3.2 percent plunge on May 6. The euro slid 0.4 percent to $1.2565, near a 14-month low, and sank to an all-time low against the Swiss franc. Crude oil dropped for a third day, falling below $75 a barrel, and gold retreated from a record. The yield on the benchmark 10-year Treasury note slipped 4 basis points to 3.54 percent, while the Dollar Index increased 0.4 percent to 85.160, above its highest closing level in a year. U.S. initial jobless claims were 444,000 last week, higher than the median estimate in a Bloomberg News survey, and earnings forecasts at Cisco Systems Inc. and Kohl’s Corp. helped lead shares of technology and consumer companies lower. U.S. prosecutors and the Securities and Exchange Commission are cooperating in a criminal probe into allegations Wall Street banks misled investors about their participation in mortgage- bond deals, the Wall Street Journal reported. Gauges of energy producers and financial firms were the biggest drags on the S&P 500, as seven of its 10 industry groups retreated. Cisco Systems lost 3.6 percent for the biggest drop in the Dow and S&P 500. Kohl’s, the fourth-largest U.S. department store company, fell 3.3 percent. Banks Probe JPMorgan Chase & Co. and Citigroup Inc. retreated after the Journal said they are among the banks being probed and have received civil subpoenas from the SEC. Deutsche Bank AG and UBS AG also are being investigated, the paper said, citing a person familiar with the matter. Goldman Sachs Group Inc. and Morgan Stanley are already being investigated, the newspaper said. The euro slumped for a third day as an almost $1 trillion emergency lending package fails to bolster confidence in the shared currency. The European Union announced the unprecedented rescue package for the region on May 9, including bond purchases by the European Central Bank, after borrowing costs surged in countries such as Greece and Portugal. Central bank demand for euros fell today, according to Stuart Thomson, who helps manage the equivalent of about $100 billion at Ignis Asset Management in Glasgow. ‘Haven’t Been Seen’ “The ECB is on its way to quantitative easing, its reputation was damaged over the weekend, and the support it had been getting from central banks wasn’t spotted this morning,” Thomson said. “Central banks are normally in supporting the euro, but they haven’t been seen today.” The MSCI World Index of 23 developed nations’ stocks dropped 0.2 percent. SAP AG, the world’s biggest maker of business-management software, slipped 2 percent in Frankfurt after agreeing to buy Sybase Inc. for $5.8 billion. J Sainsbury Plc rallied 3.1 percent in London after posting an 18 percent rise in pretax profit. BT Group Plc surged 11 percent, the most since July, after reporting operating profit that beat forecasts, helped by job cuts. Crude oil retreated 2 percent to $74.12 a barrel in New York trading. “The key driver for sentiment is uncertainty regarding growth in Europe and possible implications for world growth,” said Christophe Barret, an analyst with Credit Agricole CIB in London. “Crude stocks are pretty high. A range around $70 would be reasonable, given the economic outlook.” Asia Gains The MSCI Asia Pacific Index surged 1.8 percent, its biggest gain in two months. Tokyo Electron Ltd., the world’s second- largest maker of semiconductor equipment, jumped 7 percent after forecasting a return to profit. Samsung Electronics Co., Asia’s biggest chipmaker, rose 3 percent in Seoul. Hyundai Motor Co., South Korea’s largest automaker, climbed to a record after Goldman Sachs Group Inc. boosted its rating on the stock. Italian bonds rose after the government sold five- and 15- year securities at lower yields than existing debt. Italian 15- year bond yields dropped four basis points to 4.53 percent. “The recent 750 billion-euro package and even more the European Union central banks’ repurchase program have proved extremely supportive for periphery,” Chiara Cremonesi, a strategist at UniCredit in London, wrote in a report today. The cost of protecting against a default by Greece fell, with credit-default swaps tied to the nation’s debt declining 8 basis points to 491, according to CMA DataVision prices. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

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