Federal Reserve Chairman Ben S. Bernanke said large U. S. budget deficits threaten financial stability and the government can't continue indefinitely to borrow at the current rate to finance the shortfall. He said the Fed won't finance government spending over the long term, while warning that the financial industry remains under stress and the credit crunch continues to limit spending.

Yields on 10? year notes have climbed about 1% point since the Fed announced plans in March to buy $300 billion of long? term government bonds. The notes yielded 3.54% yesterday evening down from 3.61% day before yesterday.

The budget deficit this year is projected to reach $1.85 trillion, equivalent to 13% of the nation's economy, according to the nonpartisan Congressional Budget Office.

U. S. stocks fell for the first time in five days, extending a global drop, as a report showed the nation lost more jobs than forecast, commodities slid and the Standard & Poor's 500 Index traded at the most expensive in eight months.

Companies in the U. S. cut an estimated 532,000 workers in May, according to a private report. A government release showed factory orders grew less than expected.

The Labor Department's monthly jobs report, scheduled for June 5, may show payrolls at companies and government agencies shrank by
520,000 in May and unemployment rose to a 25? year high of 9.2%, based on a Bloomberg survey of economists.

Oil tumbled 3.6% to close at $66.12 a barrel on the New York Mercantile Exchange after U. S. supplies unexpectedly increased and fuel consumption plunged to a 10? year low, according to an Energy Department report.

China stocks were downgraded at BNP Paribas, which said investors should instead buy more Indian equities because valuations, fund flows and liquidity in the South Asian nation have become more favorable. Chinese shares were cut to "neutral" from "overweight," keeping India "overweight."

Russian stocks slumped the most in almost four months as Citigroup Inc. advised investors to sell shares after the market doubled in three months. The 30? stock Micex Index fell 7.5% to 1,109.21, the steepest drop since Feb. 17.

Asian stocks dropped for the first time in five days, led by consumer and mining companies, after U. S. reports showed the service sector improved less than expected and more workers lost jobs.

Indian equity markets are expected to open lower and will continue to remain low during the day.