U.S. stocks were poised for the longest slump of the year as Wal-Mart Stores Inc. slid after telling suppliers it was cutting orders. Commodities halted a four-day slump, while Treasuries rose as investors watched budget negotiations in Washington.
The Standard & Poor’s 500 Index (CME:SPZ13) lost 0.2% to 1,694.62 at 1:36 p.m. in New York for a fifth straight decline, while the Stoxx Europe 600 Index closed little changed. The S&P GSCI Index of 24 raw materials advanced 0.3% as wheat, corn, silver and gold jumped more than 1% to lead gains. Benchmark 10-year Treasury (CBOT:ZNZ13) yields fell 2.5 basis point to 2.63%, the lowest level in six weeks. Japan’s currency rose against 12 of its 16 major counterparts after earlier strengthening versus all 16.
Treasury Secretary Jacob J. Lew said yesterday that confidence that a deal can be struck to raise the U.S. debt limit is “a bit greater than it should be.” Commerce Department data showed orders for durable goods rose 0.1% in August after plunging 8.1% in July and purchases of new homes climbed 7.9% to a 421,000 annualized pace. A Bloomberg National Poll showed Americans are losing faith in the economic recovery.
“While it’s likely that the U.S. will reach a budget deal in the end, the uncertainty surrounding it in the meantime has fueled risk aversion,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London.
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.
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. Twenty-seven% of poll respondents anticipate improvement in the U.S. economy’s strength over the next year, down from 39% in the last survey in June, according to a Bloomberg National Poll.
The S&P 500 retreated 1.6% over the previous four sessions.
Wal-Mart Stores Inc. slumped 2% 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 the company flagged in last month’s earnings report. Last week, an ordering manager at the company’s Bentonville, Arkansas, 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.
Among other stocks moving today, Stryker Corp. slipped 2.3 after agreeing to buy Mako Surgical Corp. for $1.65 billion. Carnival Corp. retreated 5.2% as analysts cut their recommendations after the world’s largest cruise-ship operator forecast a possible quarterly loss. Noble Corp. added 3% after saying it plans to spin off about half its fleet.
J.C. Penney Co., the retailer trying to reverse $1.6 billion of losses in the past year, sank 13% after Goldman Sachs Group Inc. said its liquidity will be strained this quarter.
The S&P 500 has rallied almost 6% in the third quarter while Treasuries retreated 0.1% 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.”
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%, compared with a forecast of 1.422% 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.
About three stocks fell for every two that rose in the Stoxx Europe 600 Index. Nordea Bank AB slid 2.6% as Sweden sold its remaining 7% stake in the bank for 21.6 billion kronor ($3.4 billion).
The yen rose 0.1% to 98.63 per dollar, appreciating for a fourth successive day. The U.S. currency weakened 0.4% to $1.3525 per euro. The euro was up 0.3% at 133.40 yen.
The Norwegian krone slid against 14 of 16 major peers after a report showed unemployment rose to 3.6% in July from a revised 3.4% the previous month. It weakened 0.5% to 6.0024 per dollar and fell 0.9% to 8.12348 per euro.
New Zealand’s dollar weakened after the nation’s trade deficit unexpectedly widened. the so-called kiwi fell 0.2% to 82.64 U.S. cents, after a 1.1% slide yesterday that was the biggest loss in a month.
The S&P GSCI Index rebounded following a four-day, 2.1% drop. The commodities gauge pared gains as West Texas Intermediate crude erased an advance of as much as 0.8% after government data showed U.S. inventories unexpectedly increased last week. Crude for November delivery was down 0.4% at $102.75 a barrel after sliding almost 5% over the past four sessions.
Copper for three-month delivery climbed for the first time in four days, gaining 0.7% to $7,197.50 a metric ton on the London Metal Exchange. Aluminum added 0.5% to $1,804.00 a ton, and zinc climbed 0.6% to $1,886 a ton.