Bloomberg News

U.S. Stocks Drop as Yen Slips Amid Budget Deadlock

December 24, 2012

U.S. Stock Futures Decline Amid Budget Deadlock as Yen Weakens

The Japanese national flag flies atop the Bank of Japan headquarters in Tokyo, Japan. Photographer: Akio Kon/Bloomberg

U.S. stocks fell amid growing concern American lawmakers will fail to reach a budget agreement by the end of the year. The yen weakened as Japan’s incoming prime minister said he will consider changing the law governing the central bank, while commodities declined.

The Standard & Poor’s 500 Index dropped 0.2 percent to 1,426.66 as of 1 p.m. in New York. The Stoxx Europe 600 Index slipped 0.2 percent. The yen fell to a 20-month low against the dollar, sliding 0.7 percent. Natural gas lost 3 percent, the biggest drop since Dec. 7, amid forecasts for warmer weather.

Time is running out for U.S. lawmakers and President Barack Obama to agree on a budget deal by year-end to avoid triggering more than $600 billion in tax increases and spending cuts, Senator Joseph Lieberman said. Japan’s Shinzo Abe said he will consider changing laws governing the central bank if it fails to revise its inflation target up to 2 percent next month.

“Fiscal cliff, fiscal cliff, fiscal cliff,” said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “There’s a lot of uncertainty. We’re at a political dead end. Everything has cooled off. The market has become cautious.”

Trading on the New York Stock Exchange closed at 1 p.m. today ahead of the Christmas holiday. Trading in Treasuries ended at 2 p.m. New York time and will remain closed Dec. 25, according to the website of the Securities Industry and Financial Markets Association. Exchanges in 10 of the 18 western European nations were shut today, including Germany, Switzerland and Italy. The other markets closed early.

Thin Volume

Hewlett-Packard Co., Microsoft Corp. and McDonald’s Corp. slumped at least 1 percent to lead declines among the biggest U.S. companies. Research In Motion Ltd. slid 2.8 percent, after the largest drop since 2008 on Dec. 21. Trading in S&P 500 companies was 33 percent below the 30-day average at this time of day.

The S&P 500 had its biggest decline in more than a month on Dec. 21 after U.S. House Speaker John Boehner failed to garner support from his caucus for “Plan B,” which would have extended tax cuts on incomes below $1 million. The gauge has rallied 14 percent this year, its largest annual gain since 2009.

“For the first time I feel it’s more likely that we will go off the cliff,” Lieberman, a retiring Connecticut independent, said on CNN’s “State of the Union” program. Lawmakers plan to return to Washington Dec. 27 to continue their negotiations.

Yen Weakens

The yen fell 0.7 percent to 84.84 per dollar, weakening against all of its 16 major counterparts. Abe said on Fuji Television yesterday that he will consider revising the central bank law if the Bank of Japan fails to increase its inflation target to 2 percent from 1 percent at its January meeting.

The yen has tumbled 13 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has weakened 2.7 percent and the euro has dropped 0.9 percent.

Natural gas futures declined in New York as forecasts for a warmer start to January signaled reduced demand for heating fuels. MDA Weather Services in Gaithersburg, Maryland, predicted above-normal temperatures for the middle third of the U.S. from Jan. 3 through Jan. 7.

To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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