S&P 500 Extends Longest Slump of Year; Treasuries Rally

The Standard & Poor’s 500 Index capped its longest slump of the year as Wal-Mart Stores Inc. told suppliers it was cutting orders, fueling concern consumer spending is slowing. Oil slid for a fifth day, while Treasuries rose as investors watched budget negotiations in Washington.

The S&P 500 lost 0.3 percent to 1,692.77 at 4 p.m. in New York for a fifth straight decline, while the Stoxx Europe 600 Index closed little changed. Oil sank to the lowest level since July after an unexpected increase in U.S. inventories. Benchmark 10-year Treasury yields fell 3.5 basis point to 2.62 percent, the lowest level in six weeks. The Bloomberg U.S. Dollar Index slipped 0.2 percent while the euro and yen strengthened against most major peers.

The U.S. Congress hasn’t passed a budget for the 2014 fiscal year, which starts next week. The House and Senate are at odds over using the measure to stop funding for the 2010 health-care overhaul known as Obamacare, and the lack of an agreement may lead to a government shutdown on Oct. 1. Stocks swung between gains and losses for most of the session before benchmark indexes turned lower after Bloomberg News reported that Wal-Mart was cutting orders for this quarter and next.

“We’ve seen a little bit of weakening in the strength of the consumer recently and Wal-Mart could be a good example of that, where people are starting to pull back on marginal purchases,” James W. Gaul, a fund manager at Boston Advisors LLC, which oversees about $2.3 billion from Boston, said in a phone interview. “We have the usual Washington nonsense with the potential shutdown in the government. It’s enough items that, when added together, give the market a little bit of a pause.”

Government Funding

The U.S. Senate unanimously advanced a stopgap spending measure after Republican Ted Cruz defied party leaders by staging an extended speech that lasted more than 21 hours. Before sending the measure back to the House, Senate Democrats plan to strip language from the House measure that would choke off funding for the 2010 health-care law.

Unless an agreement is reached to expedite Senate consideration of the measure, a vote on passage could occur as late as Sept. 29. That would give the House just one full workday to act before spending authority expires.

Treasury Secretary Jacob J. Lew said yesterday that investor confidence that a deal can be struck to raise the U.S. debt limit is “a bit greater than it should be.” Lew, who spoke at the Bloomberg Markets 50 Summit in New York yesterday, said the government probably will have less than $50 billion in cash by mid-October.

The S&P 500 has retreated 1.9 percent in the past five sessions, trimming its September rally to less than 3.7 percent.

Wal-Mart Orders

Wal-Mart Stores Inc. slumped 1.5 percent for the biggest drop in the Dow Jones Industrial Average. The world’s largest retailer is cutting orders it places with suppliers this quarter and next to address rising inventories. Last week, an ordering manager at the company headquarters described the pullback in an e-mail to a supplier, who said others got similar messages.

“We are looking at reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was reviewed by Bloomberg News.

David Tovar, a Wal-Mart spokesman, said the order pullback isn’t “across the board” and is happening “category by category.”

“In some cases, we’re going to be taking less, in some we’re going to be taking more,” he said in a telephone interview.

Market Leaders

Food and consumer-staples retailers, a category that includes Wal-Mart, lost 0.9 percent for the second-biggest decline among 24 groups in the S&P 500. Other S&P 500 retailers fell 0.8 percent as a group as Family Dollar Stores Inc., Kohl’s Corp. and Dollar General Corp. all lost at least 1 percent. J.C. Penney Co., the department-store chain trying to reverse $1.6 billion of losses in the past year, sank 15 percent after Goldman Sachs Group Inc. said its liquidity will be strained this quarter.

Among other stocks moving today, Stryker Corp. slipped 2.9 after agreeing to buy Mako Surgical Corp. for $1.65 billion. Carnival Corp. retreated 5.3 percent as analysts cut their recommendations after the world’s largest cruise-ship operator forecast a possible quarterly loss. Noble Corp. added 1.8 percent after saying it plans to spin off about half its fleet.

Quarter Rebalance

The S&P 500 has rallied 5.4 percent in the third quarter while Treasuries retreated 0.1 percent through yesterday, according to data compiled by Bloomberg and Bank of America Corp. The divergence will cause some funds to sell stocks and buy bonds to rebalance asset allocations. UBS AG strategist Boris Rjavinski projects “significant” outflows from U.S. equities into Treasuries, with as much as $41 billion in stocks being sold and up to $22 billion of fixed-income investments purchased by pension funds.

Fixed-income securities are poised to deliver losses “for the next couple of years,” according to BlackRock Inc., the world’s biggest money manager.

“Overall returns of the market will continue to be negative as monetary policy shifts,” Scott Thiel, deputy chief investment officer for fundamental fixed income, said at a media briefing in London. “The direction of interest rates will be higher over the next couple of years but the reality is that that’s not in every single asset class, and not in every single sector, and in particular, not in every single global market.”

Treasury Auction

Treasuries remained higher today as the U.S. sold $35 billion in five-year notes to stronger demand than at last month’s offering of the maturity.

The debt drew a yield of 1.436 percent, compared with a forecast of 1.422 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount sold, was 2.67, versus 2.38 last month and an average of 2.70 at the past 10 sales. Treasuries rose earlier amid bets U.S. budget talks risk a government shutdown. The Fed declined last week to slow its bond buying, saying it needs more evidence of economic gains.

A Bloomberg National Poll showed Americans are losing faith in the economic recover Twenty-seven percent of poll respondents anticipate improvement in the U.S. economy’s strength over the next year, down from 39 percent in the last survey in June, according to the poll.

Economic Data

Orders for goods such as computers and machinery rose less than forecast in August, showing a pickup in U.S. business spending will take time to develop. Bookings for non-military capital equipment excluding aircraft increased 1.5 percent after a 3.3 percent drop in July, the Commerce Department reported. The median forecast of economists in a survey projected a 2 percent gain. A separate report showed purchases of new homes climbed 7.9 percent to a 421,000 annualized pace.

About three stocks fell for every two that rose in the Stoxx Europe 600 Index. Nordea Bank AB slid 2.6 percent as Sweden sold its remaining 7 percent stake in the bank for 21.6 billion kronor ($3.4 billion).

The yen rose 0.3 percent to 98.45 per dollar, appreciating for a fourth successive day. The U.S. currency weakened 0.4 percent to $1.3526 per euro. The euro was up 0.1 percent at 133.17 yen as it strengthened against 15 of 16 major peers.

Krone Slides

The Norwegian krone slid against 14 of 16 major peers after a report showed unemployment rose to 3.6 percent in July from a revised 3.4 percent the previous month. It weakened 0.5 percent to 6.00601 per dollar and fell 0.9 percent to 8.12348 per euro.

New Zealand’s dollar weakened after the nation’s trade deficit unexpectedly widened. The so-called kiwi fell 0.4 percent to 82.48 U.S. cents, after a 1.1 percent slide yesterday that was the biggest loss in a month.

The S&P GSCI Index was up 0.2 percent following a four-day, 2.1 percent drop. The commodity gauge pared gains as West Texas Intermediate crude erased an advance of as much as 0.8 percent after government data showed U.S. inventories unexpectedly increased last week. Crude for November delivery settled down 0.5 percent at $102.66 a barrel, the lowest since July 3, and has retreated 5 percent in five sessions.

Copper for three-month delivery climbed for the first time in four days, gaining 0.7 percent to $7,197.50 a metric ton on the London Metal Exchange. Aluminum added 0.5 percent to $1,804.00 a ton, and zinc climbed 0.6 percent to $1,886 a ton.

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