Citigroup led financial shares lower after it said it would sell at least $20.5 billion of equity. The market looked ahead to Wednesday's Fed statement
By Elizabeth Stanton and Rita Nazareth
Dec. 15 (Bloomberg) -- U.S. stocks fell for the first time in five days, led by financial shares, as Citigroup Inc. (C) moved toward selling shares to repay government bailout funds and credit-card delinquencies increased at JPMorgan Chase & Co. (JPM).
Citigroup, the only major lender still dependent on U.S. taxpayers, fell 3.8 percent following a 6.3 percent drop yesterday after saying it will sell at least $20.5 billion of equity and debt. Marshall & Ilsley Corp. (MI) tumbled 6.8 percent after UBS AG advised investors to sell shares of five regional lenders, citing possible stock sales. Best Buy Co. (BBY), the largest electronics retailer, tumbled 8.5 percent after saying its gross profit rate will be lower than anticipated.
"Issuance is an issue," said Marshall Front, chairman of Chicago-based Front Barnett Associates LLC, which manages $500 million. "This is a lot of stock in the financial area for the market to digest."
The Standard & Poor's 500 Index lost 0.6 percent to 1,107.93 at 4:03 p.m. in New York. The Dow Jones Industrial Average slipped 49.05 points, or 0.5 percent, to 10,452. Both retreated from their highest closing levels in 14 months.
Stocks also declined as reports on wholesale prices and industrial production spurred concern the Federal Reserve will unwind stimulus measures. The government said producer prices climbed 1.8 percent in November, more than twice the median economist estimate in a survey. U.S. industrial production increased 0.8 percent in November, more than estimated and the most in three months.
All Eyes on Fed
The Federal Reserve already has begun withdrawing stimulus measures. Central bankers ended their $300 billion of Treasury purchases in October and are set in March to complete buying $1.43 trillion of housing debt. Economists including Nobel Prize-winner Paul Krugman are calling for the Fed to increase asset purchases.
The Federal Open Market Committee will release a policy statement at around 2:15 p.m. tomorrow in Washington, with interest rates forecast to remain near zero. Treasury yields climbed and the dollar strengthened on speculation the committee will hint at upcoming increases in its target for the overnight lending rate between banks, which has been in the zero percent to 0.25 percent for a year.
"If we see a couple more months of this data, and I suspect we will, it's going to spur people talking about the Fed at least jawboning rates on the upside," said William Greiner, chief investment officer at Scout Investment Advisors in Kansas City, Missouri, which manages $5.5 billion. "As long as inflation has a strong smack of a rise in commodity prices to it, it's going to be negative for the equity market."
To contact the reporters on this story: Elizabeth Stanton in New York at firstname.lastname@example.org and Rita Nazareth in New York at email@example.com