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U.S. Stocks Fall as Budget Impasse Offsets Jobless Claims

By Rita Nazareth and Sofia Horta e Costa
December 13, 2012 4:34 PM EST 64 Comments
The Federal Reserve  said yesterday it would buy $45 billion of Treasuries per month starting in January in an effort to boost growth.
Photographer: Scott Eells/Bloomberg
The Federal Reserve said yesterday it would buy $45 billion of Treasuries per month starting in January in an effort to boost growth.

U.S. stocks retreated, snapping a six-day advance in the Standard & Poor’s 500 Index, as the standoff in federal budget negotiations overshadowed a decline in jobless claims and a rebound in retail sales.

Newmont Mining Corp. and Mosaic Co. dropped at least 1.4 percent to pace losses in commodity shares. Phillips 66, the crude refiner that was spun off from ConocoPhillips in May, declined 1.6 percent on plans to raise as much as $400 million in an initial public offering for a minority interest in some of its pipeline and logistics assets. CVS Caremark Corp. (CVS) climbed 2 percent after forecasting profit that beat estimates. Best Buy Co. jumped 16 percent on a report that founder Richard Schulze will offer to take the company private by Dec. 15.

The S&P 500 fell 0.6 percent to 1,419.45 at 4 p.m. New York time. The Dow Jones Industrial Average dropped 74.73 points, or 0.6 percent, to 13,170.72. About 6.1 billion shares changed hands on U.S. exchanges, or in line with the three-month average, according to data compiled by Bloomberg.

“It’s going to be a bumpy ride until we see some type of deal on the fiscal cliff,” said Matt McCormick, who helps oversee $7.3 billion as a money manager at Cincinnati-based Bahl & Gaynor Inc. “Speeches and speculation are the drivers of the market right now. I’m hopeful that we’ll see a resolution, but the politicians seem to be going a different tune.”

U.S. House Speaker John Boehner repeated his insistence that President Barack Obama’s budget proposal is “anything but” balanced and accused the president of being “not serious” about cutting spending. Obama said the negotiations are “still a work in progress.” The deadlock in talks to avoid more than $600 billion in tax increases and spending cuts will start taking effect in January unless Congress averts them.

Further Talks

Obama and Boehner were scheduled to meet today at the White House at 5 p.m. Washington time for further budget talks, according to a spokesman for the speaker.

Applications for jobless benefits fell by 29,000 to 343,000 in the week ended Dec. 8. Economists forecast 369,000 claims. Retail sales in the U.S. rose in November as demand for automobiles rebounded and holiday shoppers snapped up electronics and clothes. Wholesale prices in the U.S. fell more than forecast in November, reflecting the biggest drop in the cost of energy since March 2009.

The Federal Reserve said yesterday it would buy $45 billion of Treasuries per month starting in January in an effort to boost growth. Interest rates will stay low “at least as long” as unemployment remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, it said.

Greece Relief

European governments geared up to provide extra aid or debt relief for Greece after releasing the country’s first loan payment in six months, signaling renewed battles over how to stabilize the euro economy. Euro-area finance ministers approved the payout of 49.1 billion euros ($64 billion) of loans through March and committed to “additional measures” in case Greece’s debt reduction veers off track.

All 10 groups in the S&P 500 retreated today as health-care, energy and technology companies had the biggest losses. Newmont Mining dropped 2.9 percent to $44.17. Mosaic, the largest U.S. fertilizer producer, slid 1.4 percent to $55.63.

Phillips 66 slid 1.6 percent to $52.21. The company plans to hold the IPO in the second half of 2013 for units in a master-limited partnership, or MLP, and use the proceeds to pay for expansion of its oil and natural gas transportation operations, the Houston-based company said today in a statement.

CVS Caremark climbed 2 percent to $48.50. Chief Executive Officer Larry Merlo has increased marketing and promotions to retain customers that it won when Walgreen Co. ended an agreement to provide Express Scripts Holding Co. shoppers with prescriptions.

Best Buy

Best Buy jumped 16 percent to $14.12. Schulze will submit an offer to the board before the Dec. 16 deadline, the Minneapolis Star-Tribune reported, citing a person it didn’t name. The bid will be about $5 billion to $6 billion, the newspaper said.

Clearwire Corp. (CLWR) surged 15 percent to $3.16 as Sprint Nextel Corp. (S) offered to take it over in a $2.1 billion deal. Sprint, which already owns more than 50 percent of Clearwire (CLWR), is seeking to acquire the remaining shares at $2.90 each, according to a regulatory filing today. That’s 5.5 percent more than the stock’s closing price in New York yesterday.

BlackBerry 10

Research In Motion Ltd. (BB) added 4.1 percent to $13.86 after saying U.S. Immigration and Customs Enforcement will test its new BlackBerry 10 devices early next year, becoming one of the first government agencies to try the new operating system.

PBF Energy Inc. (PBF) advanced 1 percent to $26.25, paring an earlier rally of as much as 8.4 percent. The oil refiner backed by First Reserve Management LP and Blackstone Group LP climbed after raising $533 million in an initial public offering that valued the company at $2.52 billion.

Warren Buffett’s Berkshire Hathaway Inc. (BRK/B) placed a higher floor under its stock by raising the price limit for share repurchases, according to Whitney Tilson, a co-founder and managing director of T2 Partners LLC. Berkshire’s Class A stock has closed higher than the original ceiling since September of last year, when the insurance and investment company began the buyback program.

Berkshire said yesterday that it’s now willing to pay as much as 120 percent of book value for its two classes of common shares, rather than 110 percent. Yesterday’s closing prices for both classes came close to the higher percentage, tied to the value of assets after subtracting liabilities.

Tilson added to his firm’s stake in Berkshire after the increase was announced, the New York-based money manager wrote yesterday in an e-mail. T2 owns Class B stock, according to a regulatory filing. Each share is equivalent to 1/1,500th of a Class A share in the company, based in Omaha, Nebraska.

“Needless to say, I’m even happier having this as my largest position,” he wrote. Berkshire was second to American International Group Inc. among T2’s biggest holdings at the end of September, the filing showed.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Sofia Horta e Costa in London at shortaecosta@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net; Andrew Rummer at arummer@bloomberg.net

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