By Michael P. Regan Jan. 21 (Bloomberg) -- Stocks and commodities tumbled for a second day, while Treasuries and the dollar advanced, on concern China will take more steps to cool off its economy and the U.S. will rein in risk-taking at banks. The Standard & Poor’s 500 Index lost 1.4 percent at 11:26 a.m. in New York to extend its two-day decline to 3 percent, the biggest since October, as financial shares slid 1.9 percent as a group. The MSCI Emerging Markets Index sank 1.6 percent as the benchmark Bovespa index in Brazil, whose largest trading partner is China, slid 2.4 percent. Ten-year Treasury notes gained for second day and the Dollar Index, which gauges the currency against six major trading partners, rose 0.4 percent. China’s economy grew 10.7 percent in the fourth quarter, the fastest pace since 2007, the statistics bureau in Beijing reported. The growth added to speculation the central bank will curb record loan growth to prevent the economy from overheating. President Barack Obama plans to limit the size and trading activities of financial institutions, just as banks are recovering from $1.7 trillion in losses and writedowns since the start of 2007. “Financials are selling off and dragging down the market,” said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “There’s concern about an overhaul of financial services companies, with increased regulation, hurting the bottom-line of banks.” The concern over lending in China and banking reforms in the U.S. overshadowed better-than-estimated earnings at companies from Starbucks Corp. to Xerox Corp. and EBay Inc. Earnings Season More than 60 companies in the S&P 500 are reporting fourth- quarter results this week and analysts surveyed by Bloomberg forecast total earnings grew 67 percent, with estimates for a 30 percent increase in the first quarter of 2010. The benchmark index’s valuation climbed last week to 25 times its companies’ reported operating profits, the highest level since 2002, following a 70 percent jump since March. The dollar rose against 13 of 16 major currencies, led by 0.9 percent advances versus the New Zealand dollar and Brazilian real. The Japanese yen gained against all 16, rising at least 1 percent against the currencies of New Zealand, British and Brazil. The difference between 2- and 10-year Treasury notes decreased for a third day as stocks declined and more Americans than forecast filed for initial unemployment claims last week. Bond Market Ten-year notes erased earlier losses as the Federal Reserve Bank of Philadelphia’s general economic index fell to 15.2 in January, lower than anticipated. The U.S. will sell a record- tying $118 billion in notes next week. The yield on the benchmark 10-year note fell one basis point to 3.64 percent. Crude oil for March delivery fell $1.26, or 1.6 percent, to $76.48 a barrel on the New York Mercantile Exchange. Gasoline inventories rose 3.95 million barrels to 227.4 million in the week ended Jan. 15, the Energy Department said today in a weekly report. Stockpiles were forecast to climb by 1.75 million barrels, according to the median of 18 analyst estimates in a Bloomberg News survey. European shares followed U.S. equities lower, with the Dow Jones Stoxx 600 Index erasing a 0.6 percent advance and slumping 1.4 percent. The MSCI Asia Pacific Index added 0.2 percent. Greek bonds recovered after the yield premium investors demand to hold Greek 10-year bonds instead of German bunds, Europe’s benchmark government securities, touched 301 basis points, the highest since the euro’s introduction in 1999. The yield on the two-year Greek bond slipped 0.2 percent to 4.39 percent. Credit-default swaps on Greek government debt fell 11 basis points to 339, according to CMA DataVision prices, after climbing to a record 353.5 earlier. The contracts traded at 174 at the beginning of December. Greece’s benchmark stock index dropped 0.8 percent, bringing its decline since Dec. 1 to 17 percent. It slid as much as 3.7 percent earlier. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net

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