U.S. Stocks Drop as Retailers Slump; Yen Falls on Stimulus Bets

Yen Touches 20-Month Low on Prospects CPI to Add Pressure on BOJ
Japanese yen banknotes. Photographer: Kiyoshi Ota/Bloomberg

U.S. stocks fell for a third day as lawmakers prepared to resume budget talks and retailers slumped after the Christmas holiday. The Japanese yen weakened to the lowest level since September 2010 amid speculation the new government will act to bolster the economy.

The Standard & Poor’s 500 Index fell 0.5 percent to 1,419.87 as of 4 p.m. in New York. The yen retreated 1 percent to 85.63 per dollar, declining against all of its 16 major counterparts. Oil jumped 2.7 percent to a two-month high after a report that the United Arab Emirates arrested terrorists planning on carrying out attacks in the region. The S&P GSCI Index of 24 raw materials increased 1.3 percent and copper climbed 1.5 percent.

U.S. lawmakers convene tomorrow for budget talks aimed at avoiding more than $600 billion in tax gains and spending cuts scheduled to take effect Jan. 1. Shinzo Abe, whose Liberal Democratic Party won a landslide victory in the Dec. 16 election, said today his government’s mission is to restore a strong economy.

“It’s a stalemate,” Scott Armiger, a money manager at Christiana Trust in Greenville, Delaware, said in a telephone interview. Christiana Trust oversees $14 billion. “With the fiscal cliff, the questions are how bad will the deal be or will they just extend it and let the new Congress address it?”

Trading in S&P 500 companies was 34 percent below the 30-day average at this time of day. European markets were closed.

Retailers Slump

Nine out of 10 groups in the S&P 500 retreated. Coach Inc. and Urban Outfitters Inc. declined at least 2.7 percent as consumer discretionary stocks fell. Apple Inc., the world’s most valuable company, slipped 1.4 percent as technology companies posted losses. Cliffs Natural Resources Inc. gained 2 percent as raw-material stocks advanced.

Obama and House Speaker John Boehner have been unable to agree on tax-rate increases for top earners or cuts to entitlement programs, complicating the chances of getting a package done. Before going on Christmas vacation, Obama urged leaders of both parties to put together an interim bill to keep taxes from rising on middle-income Americans as they work on a more comprehensive package.

U.S. home prices climbed in the year to October by the most in more than two years as the real-estate market rebounds and contributes to the U.S. economic recovery. The S&P/Case-Shiller index of property values in 20 cities increased 4.3 percent from October 2011, the group said. The median forecast of 30 economists in a Bloomberg survey projected a 4 percent gain.

Holiday Sales

U.S. holiday sales growth slowed by more than half this year after gridlock in Washington soured consumers’ moods and Hurricane Sandy disrupted shopping, MasterCard Advisors SpendingPulse said. Retail sales grew by 0.7 percent from Oct. 28 through Dec. 24, the research firm said yesterday, without providing a dollar figure in the billions. Sales grew at a 2 percent pace in the same period a year ago.

The yen has tumbled 13.7 percent this year, the biggest drop among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is the second-worst performer with a 2.8 percent slide, while the euro has lost 0.6 percent.

Oil climbed as much as 3.1 percent in New York. U.A.E. security authorities said members of the terrorist group had obtained equipment and materials to carry out their attacks, according to the country’s official news agency. Saudi Arabia assisted in uncovering the terrorist cell, WAM said.

Copper Mines

Copper capped the biggest gain in almost four weeks after workers rejected a wage proposal at BHP Billiton Ltd.’s Escondida mine, the world’s biggest source of the metal. Plant and mine-shift workers “unanimously” rejected the proposal on Dec. 22, according to their union. A failure to reach an agreement may strain world supplies next year as workers can legally go on strike once the deadline for compulsory negotiations expires on July 31.

The yield on 10-year U.S. Treasuries fell two basis points to 1.75 percent. Trading in the notes opened as usual in New York after being shut for Christmas in the U.K. and Japan today, and around the world yesterday. European and U.K. bond markets remain closed.

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