U.S. Stocks Fall as Retailers Slump Amid Budget Deadline
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third day, as President Barack Obama and Congress prepared to resume budget talks and retailers slumped after the Christmas holiday.
Nine out of 10 groups in the S&P 500 (SPX) retreated. Coach Inc. (COH) and Ralph Lauren Corp. (RL) declined at least 3.3 percent as consumer discretionary stocks fell. Apple Inc. (AAPL), the world’s most valuable company, slipped 1.4 percent as technology shares tumbled. Cliffs Natural Resources Inc. (CLF) gained 2 percent as raw-material stocks advanced amid speculation Japan’s new government will act to bolster the economy.
The S&P 500 fell 0.5 percent to 1,419.83 at 4 p.m. in New York. The index’s three-day losing streak is the longest since Nov. 15. The Dow Jones Industrial Average dropped 24.49 points, or 0.2 percent, to 13,114.59 today. More than 4 billion shares traded hands on U.S. exchanges today, 34 percent below the three-month average. European markets remained closed for a second day.
“The finance center is still Washington right now,” Scott Armiger, a money manager at Christiana Trust in Greenville, Delaware, said in a telephone interview. Christiana Trust has $14 billion in client assets. “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?”
U.S. equity markets were closed for the Christmas holiday yesterday. The S&P 500 dropped 1.2 percent over the previous two trading days amid concern policy makers will fail to strike a compromise on more than $600 billion in automatic budget cuts and higher taxes, the so-called fiscal cliff. The gauge has still rallied 13 percent this year, on course for its largest annual gain since 2009.
House Speaker John Boehner and the president 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. Congress is due to return to Washington tomorrow, the same day Obama will arrive from his Christmas vacation in Hawaii.
Before going on 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. stocks rose earlier today as Shinzo Abe, whose Liberal Democratic Party won a landslide victory in the Dec. 16 election, said his government’s mission is to restore a strong economy. Abe, speaking in a televised press conference after being officially sworn in by Emperor Akihito, said top priorities include bold monetary policy and a flexible fiscal policy.
In the 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 economic recovery. The S&P/Case- Shiller index of property values in 20 cities increased 4.3 percent from October 2011, the group said today in New York. The median forecast of 30 economists in a Bloomberg survey projected a 4 percent gain.
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. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.
“The good news was that the Case-Shiller numbers were pretty good,” Armiger said. “It looked like housing prices bumped up a couple percent, but it’s a light trading, light volume week. The offset is Christmas spending was less robust than people were expecting, so that’s a bit of a downer. We were hoping consumers would spend a little more.”
Discretionary stocks lost 1 percent, the most out of 10 groups in the S&P 500. Coach sank 5.9 percent, the most since July, to $54.13 and Ralph Lauren slid 3.3 percent to $146.03. Amazon.com Inc., the world’s largest online retailer, erased 3.9 percent to $248.63 for the biggest drop since February.
Technology companies fell 0.6 percent as a group. IPhone and iPad maker Apple declined 1.4 percent to $513. Microsoft Corp. lost 0.7 percent to $26.86. EBay Inc. (EBAY), the owner of the world’s largest Internet marketplace, dropped 1.6 percent to $50.24.
Research In Motion Ltd. (RIMM) gained 11 percent, the most since Nov. 23, to $11.83. The beleaguered maker of the BlackBerry smartphone rebounded after erasing a quarter of its market value following last week’s earnings report. While the company raised concerns about declining service fees, investors may have overestimated the impact of the change on earnings per share, Kevin Smithen, an analyst at Macquarie Securities USA Inc. in New York, said today.
Cliffs, the largest iron ore producer, climbed 2 percent to $36.05 as raw-material companies posted the only gain among 10 S&P 500 groups, rising 0.6 percent. Prices for gold, copper and silver all rose.
“Commodities will stand to improve on increasing global confidence that global activity remains generally intact,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC in Philadelphia, which manages about $54 billion, said by phone. “We’re seeing some of the news under way coming from Japan. It is still the third-largest economy in the world. The new prime minister’s campaigned on a weaker yen so that’s constructive on the Japanese equity market.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 option prices, rose 4.8 percent to 19.48, the highest level since July 24.
Stocks that fell the most this year are rebounding and leading trading volume, according to JPMorgan Chase & Co. Companies that ranked in the bottom 20 percent of performance this year were down 20 percent on average through Nov. 15, Thomas J. Lee, the New York-based chief U.S. equity strategist at JPMorgan, said in a Dec. 20 note. Those shares have recovered 8 percent in the past month, he wrote. The group includes for- profit educator Apollo Group Inc. and oil explorer Denbury Resources Inc.
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