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U.S. stocks declined, halting a five- day advance in the Standard & Poor’s 500 Index, as the European Central Bank’s balance sheet increased to a record after a surge of bank lending to stem the region’s debt crisis.
Stocks slumped as the ECB’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion). Lending to euro- area banks jumped to 879 billion euros in the week ended Dec. 23. The ECB last week awarded 523 banks three-year loans totaling a record 489 billion euros to encourage lending. So far, banks are parking the money back at the ECB. Overnight deposits at the central bank increased to an all-time high of 452 billion euros yesterday.
Stock-futures rose in early trading today as Italy sold 9 billion euros ($11.8 billion) of six-month Treasury bills and borrowing costs fell from the previous auction as the government passed measures aimed at trimming the euro region’s second- biggest debt. A bigger test of the European Central Bank’s lending on demand for European bonds comes tomorrow when Italy sells as much as 8.5 billion euros of longer-maturity debt.
Dow 12,173.17 -118.18 -0.96%, Nasdaq 2,597.42 -27.78 -1.06%, S&P 500 1,251.80 -13.63 -1.08%
Alcoa (AA), the largest U.S. aluminum producer, retreated 1.9 percent to $8.62. Caterpillar (CAT), the world’s largest construction and mining-equipment maker, dropped 2.2 percent to $89.51.
Bank of America (BAC) lost 2.9 percent, the most in the Dow, to $5.32. Citigroup Inc. erased 2.8 percent to $26.16.
Molycorp Inc. slumped 13 percent, the biggest decline in the Russell 1000 Index, to $24.47. The price estimate for the owner of the largest rare-earth deposit outside China was cut to $39 a share from $57 by JPMorgan Chase & Co., which cited pressure on rare earth prices.
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