Most Stocks Fall on Greece, Fiscal Cliff as Metals Gain
Most U.S. stocks fell, following the worst weekly drop since June, as investors awaited budget talks in Washington and results of a European meeting on Greek aid. Industrial metals rallied as China’s exports topped forecasts.
About seven stocks dropped in the U.S. for every six that advanced. The Standard & Poor’s 500 Index, which tumbled 2.4 percent last week, closed little changed at 1,380 at 4 p.m. in New York. A gauge of industrial metals in the S&P GSCI Index of commodities increased 1.4 percent as aluminum, zinc and copper jumped. The yuan reached a 19-year high. Australia’s currency gained against 15 of 16 major peers as New Zealand’s dollar rose versus all 16, while the euro traded near a two-month low.
Investors watched for developments in the U.S. federal budget debate as lawmakers from both parties and firms such as Pacific Investment Management Co. predicted an agreement to avoid the so-called fiscal cliff. China’s exports jumped 11.6 percent last month, the customs administration said on Nov. 10. European finance ministers meet today after Greek lawmakers passed a 2013 budget needed to unlock bailout funds.
“We’re watching the news headlines which will all be about the fiscal cliff for the next six weeks,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $15 billion, said in a phone interview. “There’s a high probability that they will do a deal. It’s more a matter of the timing. The longer it goes, the more they seem to be in disagreement before cutting a deal, the more negative the market will begin to react.”
U.S. bond markets were closed today for the Veterans Day holiday. About 4.6 billion shares changed hands in the U.S. today, 24 percent less than the three-month daily average.
Fewer than 292 million shares of New York Stock Exchange- listed companies changed hands on the NYSE, the least in Bloomberg data going back to 2003, as the Big Board canceled trading and closing auctions in 216 securities after an outage in a computer that matches orders and processes transactions.
Microsoft Corp., Hewlett-Packard Co. and Travelers Cos. led losses in the Dow Jones Industrial Average (INDU), while gains in United Technologies Corp. and AT&T Inc. left the gauge little changed. Jefferies Group Inc. jumped 14 percent after Leucadia National Corp. said it will buy the investment bank. Titanium Metals Corp. surged 43 percent after Precision Castparts Corp. agreed to buy the maker of melted products.
The S&P 500 has slumped more than 3.3 percent since President Barack Obama’s re-election set up a showdown with the Republican-controlled House of Representatives over the fiscal cliff, which threatens to trigger $607 billion in tax increases and spending cuts. Obama invited the top Democratic and Republican leaders in Congress to the White House this week to begin talks on a budget plan.
Should policy makers fail to reach an agreement, the automatic spending cuts and tax increases could send the U.S. into a recession and trigger a second credit downgrade, according to Oppenheimer & Co. S&P cut its AAA rating in August 2011 after an impasse on the debt ceiling.
“Even though the U.S. has already weathered a downgrade earlier in the process of the current economic recovery, a second downgrade might not be as easily digested or received by the markets and foreign investors as the first,” John Stoltzfus, chief market strategist at Oppenheimer, wrote in a note today.
S&P 500 Forecast
David Bianco, Deutsche Bank AG’s chief U.S. equity strategist, said the next 5 percent move in the S&P 500 is likely up and advised clients to use the dip to buy growth stocks. He cut his 2012 estimate for the benchmark index to 1,450 from 1,475, while reiterating a 12-month forecast of 1,500.
“We still believe that the fiscal cliff will be averted with compromise legislation, but President Obama’s re-election and a larger Democrat majority in Senate raise the likely amount of tax hikes vs. spending cuts in the new legislation,” Bianco wrote in a Nov. 9 report.
Copper rebounded from near the lowest close since August and aluminum and zinc surged more than 2 percent. China is the biggest buyer of copper and aluminum. Oil in New York slipped 0.6 percent to $85.57 a barrel. Soybeans declined 3.2 percent to a four-month low of $14.05 a bushel on signs of increasing supplies in the U.S. Midwest and South America.
The Australian dollar rose 0.4 percent versus the U.S. currency and New Zealand’s dollar strengthened 0.5 percent. The euro was little changed at $1.2712, near a two-month low.
China’s yuan strengthened to 6.2295 per dollar. The central bank raised its reference rate and the securities regulator said a government quota will be increased to allow more yuan raised overseas to be invested in domestic capital markets.
In Europe, Telecom Italia SpA (TIT) climbed 4.2 percent as a person with direct knowledge of the bid said Egyptian billionaire Naguib Sawiris, founder of Orascom Telecom Holding SAE (ORTE), offered to purchase a stake in the Italian phone company. Cobham Plc (COB) tumbled 9.7 percent as the world’s largest maker of airborne-refueling equipment forecast weaker sales and profitability next year.
Greece may need as much as 32.6 billion euros ($41 billion) in extra financing through 2016, putting pressure on a German- led bloc of creditors to make concessions in order to prevent a renewed flareup of the European debt crisis.
Plans to give Greece two more years to meet deficit- reduction targets would open up financing gaps of 15 billion euros through 2014 and 17.6 billion euros in 2015-2016, according to an assessment by the country’s creditors that was obtained by Bloomberg News.
The MSCI Asia Pacific dropped 0.4 percent and the Nikkei 225 Stock Average slid 0.9 percent after a report showed Japan’s economy contracted last quarter by the most since the earthquake and tsunami in early 2011.
Four stocks fell for every three that gained in the MSCI Emerging Markets Index (MXEF), which slipped 0.2 percent. India’s Sensex lost less than 0.1 percent after industrial production unexpectedly fell, while Russia’s Micex Index increased 0.5 percent. Brazil’s Bovespa index lost 0.5 percent, South Korea’s Kospi Index slipped 0.2 percent and the Shanghai Composite Index (SHCOMP) climbed 0.5 percent.
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