U.S. Stocks Fall Amid Talks on Fiscal Cliff, Greek Aid
U.S. stocks fell, following the Standard & Poor’s 500 Index’s biggest weekly gain since June, as lawmakers prepared to debate the so-called fiscal cliff and euro-area finance ministers discuss Greek aid.
UnitedHealth Group Inc. (UNH) slumped 0.7 percent after providing a profit forecast below estimates. DreamWorks (DWA) Animation SKG Inc. lost 5.2 percent as “Rise of the Guardians” opened in fourth place in cinemas over the Thanksgiving weekend. Best Buy Co. and EBay Inc. (EBAY) rallied at least 4.9 percent while Macy’s Inc. (M) slumped 4.5 percent as retailers extended deals into Cyber Monday. Apple Inc. (AAPL) gained 3.2 percent as technology shares rebounded.
The S&P 500 (SPX) fell 0.2 percent to 1,406.29 in New York, after the benchmark index jumped 3.6 percent last week. The Dow Jones Industrial Average slid 42.31 points, or 0.3 percent, to 12,967.37 today. More than 5.3 billion shares traded hands on U.S. exchanges today, or 13 percent below the three-month average, according to data compiled by Bloomberg.
“We’ve got a lot of negatives,” Peter Sorrentino, who helps manage about $14.6 billion of assets at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “There’s the backdrop of what’s going on in the European Union with the bailouts and recapitalizing the banks. On top of that, we have issues in the U.S. with regard to our fiscal policy. That’s just enough reason at this point in time to take risk off the table and wait for more insight and clarity.”
Congress returns from the Thanksgiving recess this week, seeking a budget deal to avoid $607 billion of automatic tax increases and spending cuts from kicking in next year. While Republicans favor raising federal tax revenue by limiting deductions, Democrats have pushed for higher rates on upper-income earners.
The Congressional Budget Office has said a failure to avoid the fiscal cliff could lead to a recession and a jobless rate of about 9 percent, compared with the October rate of 7.9 percent.
“Fiscal-cliff negotiations are likely to be the immediate focus this week,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report. “As a reminder of the gathering urgency there are only 36 days left until the fiscal cliff is due to kick-in, and from a practical stand point, exactly four weeks until the Christmas break to bridge the outstanding gap between the Democrats and Republicans.”
Euro-area finance ministers meet in Brussels for a third time this month to try to release an aid payment to Greece and produce a plan to keep the country a solvent member of the currency bloc. They failed to make the decisions in two previous meetings this month.
A breakthrough hinges on the ministers coming up with 10 billion euros ($13 billion) to fill the financing gap that emerged when Greece this month got two more years to meet deficit-reduction targets.
Morgan Stanley’s Adam Parker predicted the S&P 500 will end next year at 1,434, or 1.8 percent above the equity gauge’s closing level on Nov. 23. Parker, the New York-based U.S. equity strategist at the firm, wrote in a note today that “the acuteness” of issues such as the U.S. deficit and debt levels, European crisis and slowing emerging markets growth are “less sharp” than they have been in the last two years.
His forecast is the second-lowest out of eight strategists tracked by Bloomberg, following UBS AG’s Jonathan Golub, who has a 2013 prediction of 1,425.
Seven out of 10 groups in the S&P 500 slid. Telephone, energy and consumer-staple companies posted the biggest losses, retreating at least 0.7 percent. Investors sold shares of companies most-tied to economic growth. The Morgan Stanley Cyclical Index fell for the first time in five days, sliding 0.3 percent.
UnitedHealth sank 0.7 percent to $53.53. The largest U.S. health insurer is preparing for a poor business environment and reductions in government revenue. The Minnetonka, Minnesota-based company said today in a filing that 2013 earnings will be no more than $5.50 a share. Analysts anticipated $5.58 based on the average of estimates compiled by Bloomberg.
DreamWorks sank 5.2 percent to $17.11 after “Rise of the Guardians,” one of two releases this year from the Glendale, California-based company, opened with weekend sales of $24 million, Hollywood.com said. The movie was forecast to take in $32.1 million, according to BoxOffice.com.
Retailers are trying to sustain a 13 percent gain in Thanksgiving weekend sales. Spending in stores and online rose to $59.1 billion in the four days starting Nov. 22, the National Retail Federation said in a statement yesterday. A year ago, sales advanced 16 percent over the holiday weekend.
Best Buy, Macy’s
Best Buy jumped 6.7 percent for the biggest gain in the S&P 500 to $12.48, while EBay added 4.9 percent to $51.40. Amazon.com Inc. (AMZN) gained 1.6 percent to $243.62. At the same time, Macy’s slumped 4.5 percent to $39.86. Coach Inc. (COH) also fell, losing 3 percent to $57.87. Nordstrom Inc. (JWN) declined 4.1 percent to $54.24.
“Everyone is sorting through the retail data and it looks like results were mixed,” Lawrence Creatura, who helps oversee $370 billion as a Rochester, New York-based fund manager at Federated Investors Inc., said in a telephone interview. “Rather than an outright robust season, it’s one where there’ll be winners and losers. Investors are furiously sorting the data to figure out who they are.”
Utility stocks climbed 1.3 percent for the best performance among 10 S&P 500 groups. Exelon Corp. (EXC) rallied 2.6 percent to $29.32. The Chicago-based company was raised to buy from hold by Deutsche Bank AG’s Greg Poole, who said the stock is an opportunity for the value investor after a 32 percent decline this year. Utility companies are also the only sector among 10 in the benchmark stock measure to be down this year, having fallen 4.7 percent.
“The outlook has actually improved slightly as gas/power prices have strengthened,” New York-based Poole wrote in a note dated today. “While our call may be early given dividend tax hike fears and Exelon’s own unresolved dividend overhang, we now see more risk in being too late.”
Technology companies rose 0.6 percent after earlier falling as much as 0.4 percent. Apple, the world’s most valuable company, gained 3.2 percent to $589.53. Hewlett-Packard Co. (HPQ) also climbed, adding 2.4 percent to $12.74.
Boston Scientific Corp. (BSX) rallied 1.3 percent to $5.66. The second-largest seller of drug-coated stents was raised to buy from neutral by Citigroup Inc.’s Matthew Dodds, who cited the “high likelihood” that St. Jude Medical Inc.’s Durata leads -- wires that connect defibrillators to the heart -- will be withdrawn from the market within six months.
Yahoo! Inc. (YHOO) rose 1 percent to $18.76. Goldman Sachs Group Inc. added the biggest U.S. Web portal to its “conviction buy” list and raised its price estimate for the shares by 9.1 percent to $24.
Knight Capital Group Inc. jumped 13 percent to $2.82. A person with direct knowledge of the matter said the company, which was bailed out by six financial firms in August after losing $457 million in a trading error, expects to receive acquisition proposals as early as this week. Chicago-based Getco LLC, one of the rescuers, and Virtu Financial LLC in New York are among the likely bidders, said the person, who requested anonymity because the negotiations are private.
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