U.S. stocks fell

U.S. stocks fell, after the biggest three-day rally in the Standard & Poor’s 500 Index since 2009, as Massachusetts sued lenders including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) over foreclosure practices.

More Americans than forecast filed applications for unemployment benefits during Thanksgiving week, signaling limited recovery in the labor market. A purchasing managers’ index compiled by the China Federation of Logistics and Purchasing slid to 49 in November, lower than all but two of 18 forecasts in a Bloomberg News survey. Manufacturing in the U.S. grew in November at the fastest pace in five months.

Spain and France sold 8.1 billion euros ($10.9 billion) of bonds today, sending yields lower across Europe. The European Union may exempt bank debt issued before 2013 from proposals forcing investors to take losses at failing lenders, said a person familiar with the plan. Excluding the debt is designed to prevent lenders’ funding costs from rising, said the person.

Massachusetts Attorney General Martha Coakley said she sued Bank of America, JPMorgan, Citigroup Inc., Ally Financial Inc. and Wells Fargo & Co. for their allegedly “unlawful and deceptive conduct” in foreclosures. Coakley will hold a press conference today in Boston to discuss the lawsuit.

Dow 11,983.02 -62.66 -0.52%, Nasdaq 2,618.98 -1.36 -0.05%, S&P 500 1,241.29 -5.67 -0.45%

Financial stocks had the biggest drop (S5FINL) in the S&P 500 among 10 industries, falling 1.6 percent. Bank of America slumped 1.9 percent to $5.33. JPMorgan retreated 2.6 percent to $30.18. Citigroup slipped 2.7 percent to $26.75. Wells Fargo decreased 1.6 percent to $25.44.

Kohl’s Corp. lost 7.4 percent to $49.82. The retailer said November same-store sales fell 6.2 percent, missing an estimated 2.1 percent increase.

Yahoo! Inc. rallied 3.1 percent to $16.20. Alibaba Group and Softbank Corp. are in advanced talks with Blackstone Group LP (BX) and Bain Capital LLC about making a bid for all of Yahoo, said three people with knowledge of the matter. A bid may value Yahoo at more than $20 a share because of tax savings tied to the Internet company’s stakes in Alibaba and Yahoo Japan, said two of the people, who declined to be identified.