U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a record, and the yen strengthened as concern American lawmakers will fail to reach a budget deal overshadowed better-than-estimated economic data. Oil, gold and coffee led commodity gains as the dollar weakened.
The S&P 500 slipped 0.3 percent to 1,802.62 by 4:33 p.m. in New York. The Stoxx Europe 600 Index lost 0.7 percent while the euro advanced a sixth day versus the dollar in the longest rally in almost a year. Gold futures jumped 2.2 percent, the most in almost two months, while the Bloomberg U.S. Dollar Index fell a fourth day. Crude added 1.2 percent to a six-week high. Italian bond yields fell a third day after industrial output increased. The rate on 10-year Treasuries dropped four basis points.
U.S. equities retreated for the first time in three days as investors watched budget negotiations and weighed the timing of any potential cuts to Federal Reserve stimulus. Barclays Plc told investors to reduce holdings of U.S. stocks in 2014 as less-attractive valuations may end America’s leadership in global equities. Lawmakers sought to resolve a few remaining issues in budget talks, including requiring federal employees to pay more for their pensions, according to congressional aide.
“In front of the prospect of a budget deal and the Fed’s meeting next week, there’s a little bit of nervousness,” Dan Greenhaus, chief global strategist with BTIG LLC in New York, said in a phone interview. “You’re inclined to trade sideways and I think that’s what’s happening.”
The emerging U.S. budget agreement is already drawing fire from Republicans who don’t trust proposals for future savings and from Democrats who say it will punish federal workers.
Representative Steny Hoyer, the No. 2 Democrat in the House, said he’s concerned about the compromise.
“I don’t like the deal I’ve heard about but there is no deal,” Hoyer said today on CNBC. “Nobody knows what the parameters of an alleged agreement or deal is.”
Stocks pared losses earlier in the session and commodities advanced amid economic reports that beat forecasts. Job openings in the U.S. climbed to a five-year high in October, indicating employers were confident about demand even as Washington’s budget impasse shuttered parts of the government.
Another report showed wholesale trade sales and inventories increased more than economists forecast.
“Some of the run in the commodity prices is just reflecting an economy globally which is synchronizing and improving,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management who helps oversee more than $340 billion of assets, said by phone. “It’s a combo-package of the weak dollar and improved economic growth.”
The S&P 500 closed at an all-time high of 1,808.37 yesterday and has rallied 26 percent in 2013, on pace for its biggest jump since 1998. Its year-to-date advance is the fourth-biggest among 24 developed markets tracked by Bloomberg, behind Japan’s 50 percent rally and gains of at least 30 percent in Ireland and Greece. The index trades for almost 17 times reported earnings, near the highest valuation since 2010.
Microsoft Corp. (MSFT:US), Procter & Gamble Co. and Coca-Cola Co. lost more than 1.3 percent to lead a 0.3 percent decline in the Dow Jones Industrial Average. (INDU) Ares Capital Corp. dropped 3 percent after saying it will sell shares to help reduce debt. Newmont Mining Corp. rose 2.5 percent as gold surged.
Consumer-staple, utility and telephone shares had the biggest declines among the 10 main industries in the S&P 500. They are also three of the five worst performing groups of the year.
“This is typical December action,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion. “It’s caused by tax-related moves by investors. You get a lot of people selling areas of the market that underperformed for tax losses, and they match those with a little bit of selling in some of the winners.”
General Motors Co. lost 1.2 percent. The Treasury Department sold its shares in the company, freeing the carmaker from U.S. taxpayer ownership almost half a decade after first receiving government aid. GM named Mary Barra to succeed Dan Akerson as chief executive officer, making her the first female CEO in the global automotive industry. Akerson is retiring Jan. 15. Tim Solso was named chairman.
The S&P 500 Financials Index slipped 0.3 percent. Wall Street faces more intensive government scrutiny of trading after U.S. regulators issued what they billed as a strict Volcker rule today, imposing new curbs designed to prevent financial blowups while leaving many details to be worked out later.
The Fed and Federal Deposit Insurance Corp. voted unanimously to adopt the proprietary trading ban and three other agencies were to complete their approvals by the end of the day. The rule has been contested by JPMorgan Chase & Co. (JPM:US), Goldman Sachs Group Inc. (GS:US) and their industry allies for more than three years.
Shares of Starbucks Corp., the world’s largest coffee-shop chain, slid 3 percent as coffee futures surged and an ITG Investment Research analyst said sales growth in the Americas may be slowing.
MasterCard Inc. (MA:US) jumped about 1.9 percent in after-hours trading after the board of the world’s second-biggest payments network raised its dividend by 83 percent and approved a 10-for-1 stock split.
McDonald’s Corp. (MCD:US) is marketing bonds denominated in euros as U.S. companies raise debt in the currency at the fastest pace since 2008. American companies issued 46 billion euros of bonds in Europe this year compared with 20 billion euros in 2012, according to data compiled by Bloomberg.
10-year Treasury yields fell to 2.80 percent in a third day of declines.
West Texas Intermediate oil climbed for the seventh time in eight sessions and reached $98.51, the highest price since October. U.S. oil inventories probably fell for a second week, according to analysts polled by Bloomberg before a report due tomorrow. Natural gas gained a second day, adding 0.5 percent.
Arabica-coffee futures surged 3.9 percent as inventories dropped amid speculation that roasters will use more of the variety as supplies of robusta beans shrink. Stockpiles of arabica, brewed by specialty companies including Starbucks Corp., have slumped to a the lowest level since February, ICE Futures U.S. data show. Inventories of robusta, used in instant brands, were the smallest since at least 2002, according to NYSE Liffe figures.
Gold led gains among precious metals, with spot silver surging 2.7 percent and platinum gaining more than 1 percent.
Wheat futures for March delivery fell 1.8 percent to close at $6.3875 a bushel on the Chicago Board of Trade, after touching $6.35, the lowest level since June 18, 2012. The U.S. government said global supplies will be bigger than was forecast last month. Hog futures dropped the most in a week on signs demand for the meat is ebbing.
Gauges of auto and technology companies led losses in European stocks, each falling more than 1.1 percent. Royal Vopak NV lost 2.1 percent after saying it may miss its 2016 earnings forecast. Victrex Plc (VCT) jumped 4.2 percent after proposing a final dividend that exceeded forecasts. CGG SA advanced 2.3 percent after Raymond James Financial Inc. recommended buying the stock.
The spread between Italian and German 10-year bond yields narrowed to as low as 222 basis points, or 2.22 percentage points, the least since July 2011. The yield on Spain’s 10-year bonds fell seven basis points to 4.04 percent, narrowing the spread with similar-maturity German bunds to 218 basis points, the least since June 2011.
The euro added 0.2 percent to $1.3762 while Sweden’s krona sank to an 18-month low against the greenback after a report showed industrial output fell.
The yen climbed 0.5 percent versus the dollar and 0.3 percent against the euro after touching five-year closing lows against both currencies this week. The Bloomberg dollar gauge, which tracks the greenback against 10 major peers, dropped 0.3 percent to the lowest level since Oct. 31.
Ukraine’s hryvnia weakened the most since anti-government protests erupted last month as a plunge in the nation’s foreign reserves to a seven-year low left policy makers with fewer resources to defend the currency. The hryvnia, which is managed by Ukraine’s central bank to limit volatility and losses for exporters, sank 0.9 percent to 8.2475 per dollar in Kiev.
The Philippine Stock Exchange Index dropped 2 percent, the most in more than two months after a record increase in electricity prices boosted concern inflation will accelerate. India’s S&P BSE Sensex lost 0.3 percent, snapping a three-day gain. The MSCI Emerging Markets Index lost less than 0.1 percent after surging 1.1 percent yesterday.
The Hang Seng China Enterprises Index of mainland Chinese companies traded in Hong Kong lost 0.4 percent and the Shanghai Composite Index slid 0.1 percent. Chinese data showed factory production rose 10 percent from a year earlier, compared with a median projection of 10.1 percent in a Bloomberg News survey.
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