U.S. Stocks Fall for Week as Budget Talks Overshadow Fed, Growth
Consumer companies fell the most among 10 groups in the Standard & Poor’s 500 Index as analysts cut ratings for Family Dollar Stores Inc. (FDO) and Priceline.com Inc. Apple Inc. (AAPL) sank 4.4 percent after UBS AG and Jefferies & Co. lowered their share- price estimates. Berkshire Hathaway Inc. (BRK/A) and DuPont Co. each climbed 2.1 percent amid optimism over share buybacks. An index of steelmakers rallied 7 percent as economic data beat forecasts in China, the world’s biggest buyer of industrial metals.
“The market would love for a fiscal cliff deal to be announced, then it would trend back to really the fundamentals, which are actually looking better,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages $112 billion. “Time is running out here pretty quickly for certainly a grand bargain type of deal.”
President Barack Obama and Republican House Speaker John Boehner remained deadlocked during their third White House meeting on next year’s budget. More than $600 billion in tax increases and spending cuts are scheduled to start taking effect in January unless Congress acts to avert them.
Government reports showed retail sales and industrial production rebounded in November while jobless claims declined to a nine-week low. The Fed said it will buy $45 billion a month of Treasury securities starting in January to help boost growth, in addition to $40 billion a month of mortgage-debt purchases under a previous plan. Asset buying will continue until the labor market improve “substantially,” the central bank said.
Three rounds of bond purchases from the Fed have helped the S&P 500 (SPX) more than double from a 12-year low in 2009. While the benchmark gauge is up 12 percent this year, it’s fallen 1.9 percent this quarter, worse than any other developed market among 24 tracked by Bloomberg.
“The fiscal cliff is creating value in equities as there is too much negativity priced in,” said Scott Minerd, chief investment officer of Guggenheim Partners LLC, who oversees more than $125 billion from Santa Monica, California. “I’m of the mindset that the fiscal cliff is a non-event.”
Consumer-discretionary shares in the S&P 500 fell 1.2 percent for the week, the most among 10 industry groups.
Family Dollar slumped 7.2 percent to $65.86 as JPMorgan Chase & Co. reduced its rating for the discount retailer to neutral, an equivalent of hold, from overweight, citing increased competition. Dollar General Corp., the largest U.S. dollar-store chain, said it will match rivals’ price cuts to retain customers that analysts anticipate will spend more cautiously next year. Dollar General lost 6.4 percent to $43.83.
Priceline.com declined 6.9 percent to $613.54. The online travel agency was cut to hold from buy at Deutsche Bank AG on concern competition in the industry may heat up next year.
Apple tumbled 4.4 percent to $509.79. Steven Milunovich, an analyst at UBS, cut his price estimate to $700 from $780, citing concern that growth may slow for the iPhone and iPad. Based on checks with Apple’s suppliers, Milunovich said that the company is starting to curb production of the iPhone. Peter Misek at Jefferies trimmed his forecast to $800 from $900.
Berkshire climbed 2.1 percent to $89.15. The company said it will pay as much as 120 percent of book value, a measure of assets minus liabilities, for stock buybacks, signaling Chief Executive Officer Warren Buffett views the shares as undervalued. The previous limit was 110 percent.
DuPont advanced 2.1 percent to $44.09. The biggest U.S. chemical maker by market value said 2012 earnings will reach the upper end of the company’s forecast and it will spend as much as $1 billion to repurchase shares.
An S&P 500 index of steelmakers rallied 7 percent for the biggest weekly gain since September as data from China showed factory output and retail sales beat economists’ estimates while manufacturing may expand at a faster pace.
U.S. Steel Corp., the country’s largest producer of the metal by volume, jumped 9.6 percent to $23.85. Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, surged 15 percent to $33.96.
TripAdvisor Inc. advanced 8 percent to $41.67. Liberty Interactive Corp. bought about $300 million in shares of the online travel-review company, gaining voting control from billionaire Barry Diller, who stepped down as its chairman.
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