Topix Index Climbs Third Day After U.S. Retail Sales Gain

Japan’s Topix Index retreated from a 4 1/2-year high as technical indicators signaled shares may have risen too far, too fast. Losses were limited as Tokyo Electric Power Co. led utilities higher.

Real estate developers fell 4.4 percent to lead declines among the 33 Topix industry groups after jumping almost 60 percent this year. Yamaha Motor Co. fell 4.9 percent after the motorcycle maker missed profit estimates. Tokyo Electric increased 18 percent after a newspaper quoted Prime Minister Shinzo Abe as saying Tepco shouldn’t bear full blame for the Fukushima nuclear disaster. Pioneer Corp. jumped 26 percent after announcing Mitsubishi Electric Corp. and NTT Docomo Inc. will buy shares in the audio-equipment maker.

The Topix dropped 0.1 percent to close at 1,230.80 in Tokyo after yesterday rising to the highest since Aug. 29, 2008. The measure surged 43 percent this year, outperforming all major equity indexes. The Nikkei 225 Stock Average fell 0.2 percent to 14,758.42 today.

“Investors are taking profit bit by bit after stocks rose so much,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd., which has the equivalent of $325 billion in assets. “Earnings have been improving, but they haven’t been so strong that companies are willing to increase capital investment.”

Overheating Signs

Technical indicators signaled the market may be overheated following a 24 percent gain in Japan’s broadest share gauge in the past six weeks. Stocks have rallied as the yen slid amid unprecedented monetary easing from the Bank of Japan.

The Topix’s 14-day relative strength index, a measure of trading momentum, held for a third day above the 70 threshold that some traders say portends a selloff. The 25-day Toraku index, which compares the number of advancing and falling stocks, was at 144.53 yesterday. A reading above 120 may signal a drop in shares.

Developers led declines today. Mitsubishi Estate Co., Japan’s biggest property company by market value, lost 5.6 percent to 2,870 yen. Sumitomo Real Estate Sales Co. slid 6.5 percent to 6,190 yen.

Sharp Corp., reporting earnings after the close, forecast its first annual profit in three years after cutting jobs and selling stakes to Samsung Electronics Co. and Qualcomm Inc. The maker of Aquos TVs projected a 5 billion yen ($49 million) profit for the 12 months through March 2014, topping the 2.1 billion yen average analyst estimate compiled by Bloomberg. The shares climbed 4.9 percent to 531 yen today.

Sharp Earnings

Yamaha Motor fell 4.9 percent to 1,413 yen after reporting net income of 7.4 billion yen for the quarter ended March, below the average analyst estimate of 7.7 billion yen.

Utilities advanced the most among Topix groups as Tepco, Japan’s biggest power company, surged 18 percent to 522 yen. Kansai Electric Power Co., the No. 2, soared 13 percent to 1,417 yen and Kyushu Electric Power Co. jumped 6.3 percent to 1,464 yen after their ratings were raised to neutral at Nomura Holdings Inc. Tohoku Electric Power Co. advanced 12 percent to 1,338 yen after Nomura raised its target price to 1,380 yen.

Pioneer soared 26 percent to 293 yen, the most since April 2009, as it plans to sell 8.95 billion yen of shares to Mitsubishi Electric and NTT DoCoMo, according to a filing to the Finance Ministry. Proceeds will be used to develop car navigation and traffic systems.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The gauge added less than 0.1 percent yesterday, extending a record high. U.S. retail sales rose 0.1 percent in April, gaining for the first time in two months and topping the median economist forecasts for a 0.3 percent drop.

The Nikkei Stock Average Volatility Index fell 2.4 percent to 26.43, indicating traders expect a swing of about 7.6 percent on the benchmark gauge during the next 30 days. Volume on the Nikkei 225 was about 9 percent above the 30-day average, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.