Stocks Drop as Election Nears as Dollar Rises, Oil Falls
U.S. stocks slipped, trimming a weekly gain, after growing payrolls failed to extend yesterday’s rally as Americans prepared to pick a president and assessed damage from Hurricane Sandy. Treasuries pared early losses while the dollar extended gains against the euro.
The S&P 500 lost 0.9 percent to 1,414.19 at 4 p.m. in New York after surging 1.1 percent yesterday. Ten-year Treasury yields fell less than one basis point to 1.72 percent after climbing five points earlier. The dollar rose against all but three of its 16 major peers, climbing 0.9 percent to an almost one-month high of $1.2832 per euro. Oil lost 2.6 percent to $84.86 a barrel after Sandy shut down East Coast refineries.
The S&P 500 reversed a 0.5 percent advance after it topped 1,434, nearing a level watched by traders because it is the average price over the last 50 days. A net 171,000 workers were added to payrolls last month and September’s gain was more than first estimated, the Labor Department said. The increase surpassed the most optimistic forecast in a Bloomberg survey in which the median called for an advance of 125,000. Unemployment rose to 7.9 percent as more people entered the labor force.
“When the market gets to the top of the trading range, the good news is not good enough,” Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia, which oversees $2.2 billion, said in a phone interview. “All eyes are on the election and beyond. The two presidential candidates haven’t had an honest discussion with America about the pain and suffering that’s involved with balancing the budget. All you have to do is look at Europe.”
As the 2012 campaign reached its final weekend, Republican nominee Mitt Romney argued for a change from President Barack Obama’s economic policies, while the incumbent said the challenger’s proposals were those that led to the economic downturn in the first place.
The candidates, locked in a race that opinion polls call a dead heat, made their contrasting arguments in dueling CNN opinion pieces. Election Day is Nov. 6.
Stocks have on average rallied 3 percent in the two months following Election Day after a tight race, according to Thomas J. Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., who cited historical data from the last five elections with close contests. The equity market rallies even more if the challenger wins, he said.
“The uncertainty about who’s going to be our president, regardless of who it is, has been holding back investor conviction,” New York-based Lee said in a Bloomberg Radio interview today. “People just aren’t holding large positions. Once we get through Election Day, we should really start to see money put to work.”
Stocks also erased gains earlier as results from Chevron Corp., American International Group Inc. and Newmont Mining Corp. disappointed investors and commodity prices fell.
AIG, the insurer that counts the U.S. as its largest shareholder, sank 7.2 percent as premium revenue slipped at its main units.
Chevron, the second-biggest U.S. energy company by market value, lost 2.8 percent after reporting third-quarter profit declined amid lower production, falling oil prices and narrowing refining margins. Newmont Mining Corp., the largest U.S. gold producer, sank 8.4 percent after profit that missed analysts’ estimates.
Gauges of raw material and energy producers declined at least 1.7 percent to lead declines among all 10 of the main industry groups in the S&P 500, which trimmed its weekly advance to less than 0.2 percent. Exchanges were shut for the first two days of the week for Hurricane Sandy, the longest weather- related closings in the U.S. since 1888.
Starbucks Corp., the world’s largest coffee-shop operator, advanced 9 percent as fourth-quarter profit topped estimates.
Oil in New York fell for the first time in four days. Copper dropped in New York, heading for a fourth straight weekly decline, as inventories tracked by the Shanghai Futures Exchange reached a six-month high, figures showed today.
The Stoxx 600 (SXXP) climbed 1.6 percent this week. Beiersdorf AG, the maker of Nivea skin cream, rose 7.2 percent to the highest since at least 1996 as the company raised its forecast for sales growth and reported third-quarter profit that beat estimates. Alcatel-Lucent SA sank 5.5 percent today after the French phone- equipment maker swung to a loss in the third quarter.
Greece’s ASE Index (ASE) rose 5.4 percent, trimming this week’s decline to 8.3 percent. The nation’s shares have tumbled as coalition government lawmakers squabble over austerity that a Bundesbank official warned must be enforced to ensure the country receives international bailout funds.
A gauge of manufacturing in the euro area fell to 45.4 from 46.1 in September, Markit Economics said. That compares with an initial estimate of 45.3 published on Oct. 24. A reading below 50 indicates contraction.
The MSCI Emerging Markets Index (MXEF) advanced 0.4 percent. The Hang Seng China Enterprises Index of mainland companies added 1.2 percent, up 20 percent from a Sept. 5 low, marking the start of a bull market. The Shanghai Composite Index (SHCOMP) rose 0.6 percent today, India’s Sensex index climbed 1 percent and Russia’s Micex Index gained 0.7 percent.
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