Oct. 3 (Bloomberg) -- Stocks fell, extending losses from the worst quarterly retreat in almost three years, and the euro weakened as concern about Europe's debt crisis overshadowed better-than-estimated American economic data. Treasury 30-year bonds rallied as the Federal Reserve bought longer-term debt. The Standard & Poor's 500 Index lost 0.7 percent to 1,123.49 at 12:22 p.m. in New York and the Stoxx Europe 600 Index sank 1.1 percent. The S&P GSCI Index of commodities pared losses after touching a 10-month low. The euro weakened against 13 of 16 major peers, sinking to the lowest level in more than a decade against the yen. The 30-year Treasury yield sank nine basis points to 2.83 percent. Costs to protect against default on European corporate debt reached an almost three-year high. U.S. stocks resumed declines after briefly erasing losses following data on manufacturing industries and construction spending that topped economists' estimates. European officials prepared to discuss how to shield banks from the debt crisis and boost the region's rescue fund after Greece missed a deficit target for 2012, while progress was made toward resolving an obstacle to the nation's second bailout. "The focus will be on Europe until they get their house in order," Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. "There's a tremendous amount of pessimism built into stocks." Bill Gross, the manager of the world's biggest bond fund, said the global economy risks lapsing into a recession because "sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack," according to a monthly investment outlook posted on Pacific Investment Management Co.'s website today. Financial Shares Lead Financial, health-care and energy companies led losses in nine of 10 industry groups in the S&P 500. Alcoa Inc. lost 3.3 percent for the biggest drop in the Dow Jones Industrial Average after JPMorgan Chase & Co. cut its earnings and share-price estimates. Coca-Cola Co. slumped 2 percent as JPMorgan cut the shares to "neutral" from "overweight," citing a "tough macro environment. Yahoo! Inc. jumped 4.4 percent as Alibaba Group Holding Ltd. Chairman Jack Ma said he's ''very interested'' in buying the U.S. Web portal. The S&P 500 tumbled 14 percent in the third quarter, while the Stoxx 600 sank 17 percent and the S&P GSCI slid 12 percent, with each posting its biggest drop since the fourth quarter of 2008 amid the aftermath of Lehman Brothers Holdings Inc.'s bankruptcy. All but two of 19 industry groups declined in the Stoxx 600 as Commerzbank AG, Germany's second-largest lender, and Societe Generale SA of France dropped more than 5 percent. BHP Billiton Ltd. and Rio Tinto Group, the world's largest mining companies, retreated at least 1.6 percent. European Banks Dexia SA slumped 10 percent as Moody's Investors Service placed the credit ratings of the lender's three main operating entities on review for possible downgrade. Les Echos said finance ministers from Belgium and France are meeting today to discuss financing options for Dexia. The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe's sovereign debt crisis, according to two people with knowledge of the matter. Regulators held informal talks with some of the largest European lenders about producing a ''fourth-generation daily liquidity" or 4G report, according to the people, who asked for anonymity because communications with central ban kers are confidential. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person. The U.S. has already increased the number of examiners embedded in these banks, the person said. 'Big Issue' "The big issue in the euro zone remains avoiding contagion from the all-but-inevitable Greek sovereign default," Larry Hatheway, the head of macro strategy at UBS AG in London, wrote in a report today. We are "unlikely to get much relief from euro zone uncertainties in the coming months." The yield on the Greek 10-year bond lost six basis points to 22.62 percent. The yield on Italy's two-year security fell five basis points and Spain's increased one point as the European Central Bank bought the nations' bonds, according to four people with knowledge of the transactions. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose 2 basis points to 342.35, compared with the record high of 358.5 set Sept. 23, according to CMA. Greek Austerity The Greek government passed 6.6 billion euros ($8.8 billion) of austerity measures last night to cut the 2012 deficit to 6.8 percent of gross domestic product, missing the 6.5 percent goal previously set with the European Union, International Monetary Fund and ECB, known as the troika. Finance Minister Evangelos Venizelos had earlier said Greece would miss the targets and the troika accepted the new budget. Euro region finance ministers meet again Oct. 13 to decide on a sixth bailout payment. European governments are close to resolving Finland's demand for collateral to underpin bailout loans, removing an obstacle to Greece's second rescue package, three people familiar with the discussion said. --With assistance from Stephen Kirkland in London. Editors: Michael P. Regan, Jeff Sutherland To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; 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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