Most Stocks Drop as Wal-Mart Falls; Treasuries Pare Loss

Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a five-year high, as Wal-Mart Stores Inc. tumbled after an e-mail showed an executive called February sales a “total disaster.” Treasuries pared earlier losses, the yen weakened while gold and oil sank.

The S&P 500 dropped 0.1 percent to 1,519.79 at 4 p.m. in New York after closing yesterday at the highest since October 2007. The index capped a seventh straight weekly gain, the longest streak in two years. Ten-year U.S. Treasury note yields increased one basis points to 2.01 percent after climbing four points earlier. Japan’s currency lost 0.7 percent versus the dollar after Group of 20 finance chiefs resisted adopting a tougher stance on exchange rates. Oil sank 1.5 percent and gold dipped below $1,600 an ounce for the first time since August.

Wal-Mart led an afternoon retreat in equities after Bloomberg News obtained e-mails showing the biggest retailer’s sales were off to the worst start to a month in seven years as payroll-tax increases hit shoppers. Earlier gains in stocks came after U.S. consumer confidence increased to a three-month high and a separate report showed manufacturing in the New York region unexpectedly expanded in February. U.S. markets will be closed Feb. 18 for the Presidents Day holiday.

“This is the first sign that consumers are going to have a weak period here,” James Paulsen, chief investment strategist at Minneapolis, Minnesota-based Wells Capital Management, said in a telephone interview. His firm oversees $325 billion in assets. “It reinforces what a lot of people were worried about in December, with the payroll tax impacting consumers. The market is extrapolating this and that’s why we’ve seen this intraday action.”

Five-Year High

The S&P 500 index closed yesterday at the highest level since October 2007. The index has climbed about 6.6 percent in 2013 as U.S. lawmakers reached a budget compromise and earnings beat estimates at 74 percent of the companies that have reported the latest quarter’s results so far. The S&P 500 has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond buying to lower interest rates and boost economic growth.

Trading of stocks in the S&P 500 was 11 percent above the 30-day average as options on stocks, equity indexes and exchange-traded products were set to expire. The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, fell 1.6 percent to 12.46 today, near a 5 1/2-year low.

Wal-Mart extended lost 2.2 percent. The company’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.

‘Total Disaster’

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”

Other chain stores followed Wal-Mart lower, with Safeway Inc., Target Corp. and Macy’s Inc. retreating more than 1 percent. Herbalife Ltd. surged 1.2 percent after billionaire investor Carl Icahn reported a 13 percent stake in the company and said he would seek talks with the nutritional supplements company to discuss strategic alternatives.

Economic Data

Equities rose earlier after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment for February rose to 76.3, beating the median of estimates in a Bloomberg survey of economists for a reading of 74.8. The Federal Reserve Bank of New York’s general economic index climbed to 10, the highest since May 2012 and beating the highest economist forecast in a survey. The median projection called for minus 2. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.

Two-year Treasury yields increased less than one basis point to 0.27 percent, while 30-year rates added less than one basis points to 3.18 percent. The dollar was stronger against 10 of 16 peers, rising the most against the currencies of South Africa, New Zealand and Canada.

Another report showed industrial production in the U.S. unexpectedly shrank in January as factories took a breather after the biggest back-to-back gain in three decades. Output at factories, mines and utilities fell 0.1 percent after a 0.4 percent gain in December, figures from the Federal Reserve showed today in Washington.

European Markets

The Stoxx Europe 600 Index slipped 0.2 percent with the number of shares changing hands 23 percent lower than the 30-day average. The gauge closed unchanged for the week. Aker Solutions ASA, the oil-services provider controlled by billionaire Kjell Inge Roekke, plummeted 11 percent in Oslo after reporting weaker-than-expected fourth-quarter margins at most of its units.

The yen reversed earlier gains against the dollar after a G-20 official said the latest draft of the nations’ statement doesn’t echo the Group of Seven view that exchange rates shouldn’t be a target of monetary policy.

The G-20 will urge members to avoid competitive devaluations and to let their exchange rates be set by markets, the official said. The latest draft removes a line from a Feb. 11 draft which said monetary policy should be directed toward price stability, while supporting economic recovery, the aide said.

Bernanke Speaks

Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is far from operating at full strength and reiterated his commitment to record easing.

“With unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see,” Bernanke said today at a meeting in Moscow of his counterparts from the Group of 20. “The United States is using domestic policy tools to advance domestic objectives.”

Gold, silver and oil tumbled more than 1.4 percent to lead declines in commodities, sending the S&P GSCI Index down 0.5 percent. Wheat rose 1.1 percent after U.S. exports more than doubled in the week ended Feb. 7, U.S. Department of Agriculture figures yesterday showed.

The MSCI Emerging Markets Index was little changed and capped for a 0.4 percent weekly gain, its largest in a month. Russia’s Micex Index slipped 0.7 percent, while Brazil’s Bovespa slipped 0.3 percent. The Hang Seng China Enterprises Index of mainland companies added 0.2 percent on the second day of trading in Hong Kong this week. Markets in Shanghai and Taipei were closed this week for the Lunar New Year.

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