S&P 500 falls from record while commodities gain as dollar drops

U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a record, and the yen strengthened as concern American lawmakers will fail to reach a budget deal overshadowed better-than-estimated economic data. Oil, gold and coffee led commodity gains as the dollar weakened.

The S&P 500 slipped 0.3% by 4:04 p.m. in New York. The Stoxx Europe 600 Index lost 0.7% while the euro advanced a sixth day versus the dollar in the longest rally in almost a year. Gold futures jumped 2.2%, the most in almost two months, while the Bloomberg U.S. Dollar Index fell a fourth day. Crude added 1.2% to a six-week high. Italian bond yields fell a third day after industrial output increased. The rate on 10-year U.S. Treasuries dropped four basis points.

U.S. equities retreated for the first time in three days as investors watched budget negotiations and weighed the timing of any potential cuts to Federal Reserve stimulus. Barclays Plc told investors to reduce holdings of U.S. stocks in 2014 as less-attractive valuations may end America’s leadership in global equities. Lawmakers sought to resolve a few remaining issues in budget talks, including requiring federal employees to pay more for their pensions, according to congressional aide.

“In front of the prospect of a budget deal and the Fed’s meeting next week, there’s a little bit of nervousness,” Dan Greenhaus, chief global strategist with BTIG LLC in New York, said in a phone interview. “You’re inclined to trade sideways and I think that’s what’s happening.”

‘No Deal’

The emerging U.S. budget agreement is already drawing fire from Republicans who don’t trust proposals for future savings and from Democrats who say it will punish federal workers.

Representative Steny Hoyer, the No. 2 Democrat in the House, said he’s concerned about the compromise.

“I don’t like the deal I’ve heard about but there is no deal,” Hoyer said today on CNBC. “Nobody knows what the parameters of an alleged agreement or deal is.”

Stocks pared losses earlier in the session and commodities advanced amid economic reports that beat forecasts. Job openings in the U.S. climbed to a five-year high in October, indicating employers were confident about demand even as Washington’s budget impasse shuttered parts of the government.

Another report showed wholesale trade sales and inventories increased more than economists forecast.

“Some of the run in the commodity prices is just reflecting an economy globally which is synchronizing and improving,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management who helps oversee more than $340 billion of assets, said by phone. “It’s a combo-package of the weak dollar and improved economic growth.”

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