U.S. Stocks Fall as Wal-Mart Tumbles While Oil Drops

Yen Slumps to Six-Month Low on Easing Call as Europe Stocks Drop
The yen fell 2.3 percent last week to 81.32 per dollar, and weakened 2.5 percent to 103.60 per euro. Photographer: Kiyoshi Ota/Bloomberg

U.S. stocks slipped, keeping benchmark indexes at the lowest levels in more than three months, while Treasuries rose for a sixth day as lawmakers prepared for budget talks and conflict escalated in Israel.

The Standard & Poor’s 500 Index lost 0.2 percent to 1,353.32 at 4 p.m. in New York, led by consumer-staples retailers after Wal-Mart Stores Inc.’s results disappointed investors. Ten-year Treasury yields decreased less than one basis point to 1.58 percent and have fallen 16 basis points since Nov. 6. The yen weakened on speculation of more aggressive monetary stimulus. New York-traded crude oil slid after inventories rose to a three-month high.

The S&P 500 is down 5.3 percent since Nov. 6, the worst seven-day drop in a year, and Treasuries have rallied as the elections set up a budget showdown between President Barack Obama and the Republicans who control the House, pushing the nation closer to a so-called fiscal cliff of $607 billion in automatic spending cuts and tax increases. Reports today showed jobless claims rose more than forecast after superstorm Sandy hit the East Coast and Philadelphia-area manufacturing shrank.

“You are firmly tucked into the environment where all things revolve around the fiscal cliff,” said Tom Porcelli, chief U.S. economist at Royal Bank of Canada’s RBC Capital Markets unit. “We all knew that over the next few weeks claims would be greatly impacted by Sandy.”

RSI Below 30

The 14-day relative-strength index for the S&P 500, a gauge of market momentum, slid to 27.7 yesterday, ending the day below 30 for the first time since June. After June’s two-day dip in the RSI below 30, which some technical analysts say indicates a co-called oversold situation, the S&P 500 rallied 15 percent over the next three months before reaching its peak for the year on Sept. 14.

Wal-Mart Stores sank 3.6 percent as the retailer’s third-quarter revenue and fourth-quarter profit forecast trailed analysts’ estimates in anticipation of a competitive holiday season and after economic conditions slowed U.S. sales gains. Verizon Communications Inc., AT&T Inc. and Alcoa Inc. also also dropped at least 1 percent to help lead declines in the Dow Jones Industrial Average.

Viacom Inc. increased 2.6 percent after the media company’s earnings topped analyst estimates. NetApp Inc. jumped 11 percent as profit for the second quarter beat forecasts.

Earnings have exceeded analyst estimates at 72 percent of the companies that reported so far, while 59 percent missed sales forecasts, according to data compiled by Bloomberg.

Economy Data

Labor Department data this morning showed unemployment claims surged by 78,000 to 439,000 last week, the most since April 2011. Reports from Federal Reserve banks showed manufacturing unexpectedly contracted in the Philadelphia area while shrinking less than forecast in the New York region. The cost of living rose in October by 0.1 percent, the slowest pace in three months and a sign U.S. inflation is in check.

About 90 percent of the drop in the S&P 500 since Election Day “can be attributed to concerns about the U.S. fiscal cliff,” Marko Kolanovic, global head of derivatives and quantitative strategy at JPMorgan Chase & Co. in New York, wrote in a report today. More swings may be caused today because derivatives tied to the equity market expire tomorrow.

Volatility Eyed

Concerns about Washington gridlock overlap with tomorrow’s expiration for options contracts tied to underlying stocks, which “could cause high intraday volatility” as investors and traders buy and sell both derivatives and shares to adjust their positions, Kolanovic said in his analysis. The S&P 500 rose as much as 0.4 percent and declined 0.6 percent during the session.

Rates on 30-year U.S. bonds decreased less than one basis point to 2.72 percent, while two-year yields were down less than one point at 0.24 percent. Ten-year yields traded in the narrowest range in six weeks.

The Stoxx Europe 600 Index fell 1 percent to the lowest level in two months as travel companies and retailers led losses. SBM Offshore NV, GAM Holding AG, and Man Group Plc dropped more than 5 percent as MSCI Inc. removed the shares from some of its indexes, meaning funds that track the measures will sell the stocks. SBM, the world’s biggest supplier of floating oil and gas platforms, also said it won’t meet its 2012 revenue forecasts.

An MSCI gauge of emerging-market stocks slid 0.7 percent, dropping for a sixth day and headed for the longest losing streak in four months. South Korea’s KOSPI slumped 1.2 percent, reaching its weakest level in more than three months. The BSE India Sensex 30 Index dropped 0.8 percent, extending declines to a fifth day, as the government failed to meet a fund-raising target in a sale of mobile-phone airwaves.

South Africa’s FTSE/JSE Africa All Share Index retreated for a third day as platinum shares weighed on the market after the metal led declines among precious metals traded in London.

Israel, Hamas

Brent crude, the benchmark for European oil, for December delivery rose 1.3 percent to $110.98 reached a premium of $26 to New York futures, the widest since October 2011. Brent rallied as Israel and Palestinian militants exchanged rocket fire and air strikes and Prime Minister Benjamin Netanyahu said his military is ready for a “substantial expansion” to halt attacks from the Gaza Strip.

The worst violence in four years between Israel and Gaza militants began yesterday when Ahmed al-Jabari, the leader of Hamas’s military wing, was killed in a missile strike. Israeli air attacks have subsequently targeted more than 230 rocket storage or launching sites in Gaza, the army said.

Oil Inventories

West Texas Intermediate oil traded in New York lost 1 percent to $84.45 a barrel after surging 1.1 percent yesterday. The U.S. government reported inventories increased less than forecast, gaining 1.09 million barrels last week to 375.9 million, the highest level since July. Stockpiles were forecast to gain 2.65 million barrels, according to the median of 10 analyst estimates in a Bloomberg survey.

Natural gas, West Texas oil, sugar, soybeans, nickel and natural gas led declines in 15 of 24 commodities in the S&P GSCI Index, sending the gauge down 0.6 percent.

The 17-nation euro strengthened 0.3 percent to $1.2770 even as a report showed gross domestic product in the currency region fell 0.1 percent in the third quarter. Australia’s dollar dropped versus 15 of 16 major peers after the Reserve Bank said it boosted sales of the currency.

The yen slumped to its weakest level in six months versus the dollar on speculation Japan’s opposition will win elections next month and advocate unlimited stimulus. The yen depreciated at least 0.7 percent against all 16 of its major peers. Japan’s Nikkei 225 Stock Average gained 1.9 percent even as most Asian equity indexes declined.

‘Add Pressure’

Shinzo Abe, who polls show will become Japan’s premier after the election, called on the central bank to intensify measures to counter deflation and the strength of the currency.

“A government led by the Liberal Democratic Party is expected to win,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “Investors believe that will add pressure on the Bank of Japan to ease policy, and the government will adopt strong policies to get the economy out of deflation.”

Polls showed the Dec. 16 vote will favor Abe, who said today the central bank’s benchmark rate should be cut to zero or below and pledged to raise public spending.

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