U.S. Stocks Fall on Manufacturing Data Amid Cliff Concern

U.S. Stocks Advance on China Data as Greece Offers Bond Buyback
Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

U.S. stocks fell, following a two-week advance for the Standard & Poor’s 500 Index, as an unexpected contraction in manufacturing spurred concern about the potential economic toll from the so-called fiscal cliff.

DuPont Co., the most valuable U.S. chemical maker, fell 1.7 percent, leading raw-materials producers to the biggest drop among 10 S&P 500 groups. Dell Inc. rallied 4.4 percent after Goldman Sachs Group Inc. recommended buying the shares.

The S&P 500 dropped 0.5 percent to 1,409.46 at 4 p.m. in New York. The Dow Jones Industrial Average lost 59.98 points, or 0.5 percent, to 12,965.60. More than 5.6 billion shares traded hands on U.S. exchanges today, or 9.4 percent below the three-month average, according to data compiled by Bloomberg.

“The fiscal cliff concerns are actually affecting decision making at the business level,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, which oversee $400 billion in assets, said in a phone interview. “China is starting to show signs of life. The U.S. was showing signs of life, but we have the geopolitical issue that’s impeding us from moving forward. All in all, that’s just confusing the market.”

The Institute for Supply Management’s U.S. factory index fell to 49.5 in November from 51.7 a month earlier, the Tempe, Arizona-based group said today. Economists in a Bloomberg survey projected a reading of 51.4 for November, according to the median of 83 forecasts. The dividing line between expansion and contraction is 50.

China Manufacturing

A manufacturing gauge in China rose to a seven-month high in November, data released Dec. 1 showed. In Europe, Greece offered 10 billion euros ($13 billion) to buy back bonds issued earlier this year as the bailed-out nation attempts to cut a debt load that may threaten future international aid. Chancellor Angela Merkel said it’s possible Germany may ultimately accept a write-off of Greek debt.

“The numbers out of China are improving, the economy there is gaining momentum,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “If we have some indication that a deal of sorts can be struck in Congress we could have a solid rebound in the market. The political posturing is going to continue for a while yet.”

The S&P 500 increased 0.5 percent last week as investors weighed lawmakers’ comments on whether an agreement can be reached to avert spending cuts and tax increases scheduled to begin on Jan. 1.

Republican Proposal

House Republicans, rejecting President Barack Obama’s demand for tax rate increases, proposed $1.4 trillion in spending cuts and $800 billion in new revenue by limiting tax breaks and capping deductions for top earners. The proposal was contained in a letter today to Obama from House Speaker John Boehner and other Republican leaders.

U.S. Treasury Secretary Timothy F. Geithner said Republicans in Congress will be responsible for hurting the economy if they refuse to raise tax rates on the highest-income earners as part of a deal.

The S&P 500 erased earlier gains today after briefly climbing above 1,421, its average over the past 50 days. The index has closed below its 50-day average, a level watched by traders to gauge the market’s trend, since Oct. 19, data compiled by Bloomberg show.

Equities’ recent rally may fade as government efforts to reach a budget agreement may push the U.S. economy to the brink of recession, according to Gina Martin Adams, an equity strategist with Wells Fargo & Co. She forecast S&P 500 companies will earn $103 a share in 2013 and the benchmark index will end the year at 1,390. That’s the lowest projection among eight strategists surveyed by Bloomberg and compared with the average estimate of 1,546.

‘Downward Pressure’

“The U.S. economy will likely continue to struggle with the ongoing impacts of debt deleveraging in 2013,” the New York-based strategist wrote in a note today. “The market will suffer downward pressure until policymakers act decisively to convince investors that the U.S. debt house is ‘in order’.”

Raw-materials producers in the S&P 500 fell 1.8 percent as a group today. DuPont lost 1.7 percent to $42.39.

Newmont Mining Corp. declined 3 percent to $45.68. The largest U.S. gold producer appointed Gary Goldberg to replace Richard O’Brien as chief executive officer from March 1. Newmont’s announcement comes as gold producers struggle to contain costs that are rising at a faster pace than the metal’s price.

An index of airlines fell 1.9 percent as Delta Air Lines Inc. slipped 3.8 percent to $9.62. The company is mulling a bid for Singapore Airlines Ltd.’s stake in Virgin Atlantic Airways Ltd., according to people familiar with the plans who declined to be identified because the matter is private.

Dell Climbs

Dell increased 4.4 percent to $10.06 after Goldman Sachs raised its recommendation for the No. 3 PC maker to buy from sell and increased its price estimate for the shares by 44 percent to $13.

Computer Sciences Corp. added 3.2 percent to $39.27 after agreeing to sell its credit services business to Equifax Inc. for $1 billion in cash, the second divestiture in six weeks as part of an ongoing turnaround effort. Equifax increased 4.2 percent to $53.38.

Dean Foods Co. climbed 2.3 percent to $17.53. The largest U.S. dairy processor agreed to sell its Morningstar Foods unit to Saputo Inc. for $1.45 billion. Dean has been focusing more on its WhiteWave Foods Co. business, which makes Silk soy milk and International Delight coffee cream, and said in September that it was considering selling Morningstar.

Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, jumped 7.3 percent to $2.36 as some investors bet that its largest shareholder could help avert a cash shortfall. The stock, which is down 56 percent this year, has rallied 26 percent since Nov. 26, the biggest five-day advance since 2009.

Mubadala Development Co. extended its stake in AMD to about 19 percent including warrants and took an extra board seat last month, making it more likely that the investment arm of the government of Abu Dhabi would bail out the company if cash reserves dipped too low, said Cody Acree, an analyst at Williams Financial Group.

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