Commodities drop with U.S. stocks before Fed as Treasuries climb

‘Another Day’

“What matters for the Fed is whether inflation as measured by the CPI or other such measures is proving problematic,” Dan Greenhaus, chief global strategist at BTIG LLC, said in a note to clients. “Today’s report once again shows that as of now, inflation is a concern for another day.”

There’s about a 60% chance that the Fed will announce a reduction in its asset purchase program tomorrow, according to Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.

When the Fed does taper, U.S. central bank officials will offer a package of policies, which may include a change in how much they pay banks on excess reserves, thresholds for changing programs and forward guidance on policy, the Newport Beach, California-based asset manager said an in interview with Betty Liu and Cory Johnson on Bloomberg Television’s “In the Loop.”

Fed ‘Package’

“The idea is that the Fed is going to offer the market a package, and the market is going to be reacting to the package and not just one element, which is the taper,” said El-Erian of Pimco, which oversees $1.97 trillion as the world’s largest manager of bond funds. “The question is what else do they do, and I think that’s what the market hasn’t priced in fully yet, which is what else can accompany the taper decision.”

The S&P 500 rose 0.6% yesterday. The measure of U.S. stocks has advanced 25% this year, heading for its biggest annual rally since 2003. The Stoxx 600 in Europe has climbed 11% this year.

Among U.S. stocks moving today, Tenet Healthcare Corp. fell 1.9% to lead declines among hospital stocks as Citigroup Inc. said the industry’s November admissions were the “weakest” ever. 3M Co. advanced 2.9% after the company projected a 2014 profit range with a top end that exceeded analysts’ estimates. Boeing Co. climbed 0.9% after authorizing the largest share buyback in its history and boosting its dividend.

Budget Pact

The U.S. Senate advanced the budget deal to a final vote by tomorrow with Republicans divided on their support for the measure. The Senate voted 67-33 to end debate on the $1.01 trillion U.S. spending plan. The measure passed the House 332-94 Dec. 12 with almost equal numbers of Republicans and Democrats in support. The plan raises fees including for airline passengers, and is projected to reduce the budget deficit by $23 billion over 10 years.

Gold futures for February delivery lost 1% to $1,231.40 an ounce and gas oil, sugar and silver declined at least 1% as 16 of 24 commodities tracked by the S&P GSCI Index dropped. Corn, soybeans, zinc and lead had the biggest gains. Brent crude fell 0.9% to $108.44 a barrel while West Texas Intermediate oil lost 0.3% to $97.22.

The yen increased against 14 of 16 major peers and the Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, was little changed after falling the past two days.

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