Oct. 13 (Bloomberg) -- Stocks fell, halting the strongest Standard & Poor's 500 Index rally over seven days since 2009, following a drop in JPMorgan Chase & Co.'s profit and concern that equities had surged too much on optimism about the European debt crisis. The euro slid and Treasuries rallied. The S&P 500 slipped 0.9 percent to 1,196.63 at 10:38 a.m. in New York as financial shares led losses. The Stoxx Europe 600 Index tumbled 1.2 percent after closing yesterday at the highest level since Aug. 4. The euro weakened versus 10 of 16 major peers and costs to insure against default on European sovereign bonds rose. Lead and nickel led commodities lower. The S&P 500 retreated today after rebounding from a 13- month low last week, surging 9.8 percent over seven sessions as growing confidence in Europe's efforts to fight its debt crisis and improving U.S. economic data alleviated concern the U.S. economy would relapse into a recession. JPMorgan Chase, the second-largest U.S. bank, reported an approximately 33 percent profit decline excluding a $1.9 billion accounting benefit as earnings from investment banking and trading slumped. “I don't know that the road is completely clear,” James Dunigan, who helps oversee $109 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We may be a little bit ahead of ourselves from the rally we've seen as far as what that final package in Europe looks like. It's not going to be easy.” Earnings Season JPMorgan, the second-largest U.S. bank by assets, slumped 4.9 percent for the worst drop in the Dow Jones Industrial Average, which yesterday briefly erased its 2011 loss before paring its gain for the day. Bank of America Corp., which will release results on Oct. 18, lost 4.7 percent. The S&P 500 Financials Index slipped 3.1 percent and gauges of industrial companies and energy and commodity producers declined at least 1.6 percent to lead the market's drop. Stocks fell even as applications for unemployment insurance payments decreased 1,000 in the week ended Oct. 8 to 404,000, Labor Department figures showed. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey. The U.S. trade deficit was little changed at $45.6 billion in August, compared with a median projection of $45.8 billion in a Bloomberg News survey of economists, according to data from the Commerce Department in Washington. More than four stocks declined for every one that gained in the Stoxx 600. Carrefour SA sank 6 percent as the world's second-largest retailer lowered its 2011 profit forecast for the second time in three months. Anglo American Plc led a retreat in mining companies, sliding 4.6 percent. Italian Vote Italy's FTSE MIB Index slumped 3 percent to lead losses in major European benchmarks. Italian Prime Minister Silvio Berlusconi called for a confidence vote in Parliament to prove he has enough support to rule after failing to muster a majority on a legislative ballot this week. While the vote has yet to be scheduled, Berlusconi's allies have indicated it may be tomorrow. The European Central Bank said the involvement of the private sector in euro-area bailouts through forced investor losses would have “direct negative effects” on banks. “Any disagreements on how we come out of this crisis will generate pressure on markets and specifically on the financial sector,” said Luis Benguerel, a trader at Interbrokers in Barcelona, Spain. “We are coming from a solid rally in recent days on the hopes that the debt crisis may be nearing a resolution. Anything that may divert that process will generate renewed instability.” Treasuries Rally U.S. 10-year Treasuries rose, snapping a six-day decline and pushing the yield down seven basis points to 2.14 percent. German bunds advanced for the first time in seven days, driving the 10-year yield down nine basis points to 2.10 percent. Italian 10-year bond fell for a fifth day and the yield rose eight basis points to 5.82 percent, the highest since August, as the nation sold debt maturing in 2016 and 2015. The yield climbed nine basis points to 5.81 percent. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 6.9 basis points to 330. An increase signals worsening perceptions of credit quality. The euro declined 0.7 percent to $1.3695 and lost 1.3 percent to 105.2 yen. The Japanese currency rose 0.6 percent to 76.82 per dollar, strengthening versus 14 of 16 major counterparts. Copper Drops Copper dropped 2.5 percent to $3.3075 a pound and oil in New York fell 2.2 percent to $83.67 a barrel. Raw sugar jumped 1.7 percent to 26.45 cents a pound as Thailand, the world's second-biggest exporter of sugar, said floods may last until the end of the month. The MSCI Emerging Markets Index advanced 0.5 percent and is up 12 percent in seven days, the biggest rally since May 2009. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 3.7 percent, taking a rebound from its Oct. 4 low to 21 percent. The Shanghai Composite Index gained 0.8 percent after China's State Council said it will provide financial support and preferential tax policies for small companies. --With assistance from Shiyin Chen in Singapore and Michael Shanahan, Alexis Xydias, Matthew Brown, Jason Webb and Claudia Carpenter in London. Editor: Michael P. Regan

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