Retail Reports: U.S. Stocks Drop for Third Day Amid Auto

According to Bloomberg,

U.S. stocks declined for a third day, as investors assessed reports on car and retail sales before economic data this week that may offer clues on when the Federal Reserve will reduce stimulus.

Ford Motor Co. lost 2.9 percent, as carmaker stocks slipped amid November sales reports. Amazon.com Inc. (AMZN) slid 2 percent to pace declines among retailers even as online Cyber Monday sales surged to a record. Krispy Kreme (KKD) Doughnuts Inc. plunged 20 percent after quarterly revenue missed analysts’ estimates. Apple Inc. (AAPL) rose 2.7 percent to the highest in a year after buying data-analytics firm Topsy Labs Inc.

The Standard & Poor’s 500 Index declined 0.3 percent to 1,795.15 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 94.15 points, or 0.6 percent, to 15,914.62, its first close below 16,000 since Nov. 20. About 6.3 billion shares changed hands on U.S. exchanges, 3.8 percent above the three-month average.

“It’s really a mixed picture right now,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said in a phone interview from Fort Lee, New Jersey. “In the absence of any bigger data, investors are grasping for these little bits of micro data in trying to develop a conclusion. Any market that’s appreciated as much as the stock market has this year is going to be vulnerable to sell-offs.”

Economic Data

U.S. stocks fell yesterday as data showing manufacturing unexpectedly rose last month bolstered the case for the Fed to start curbing stimulus. Central-bank policy makers meet Dec. 17-18 after minutes of their last meeting in October showed officials may reduce the $85 billion in monthly bond buys should the economy improve as anticipated.

The Commerce Department will release data tomorrow on new home sales and the central bank will publish its Beige Book, which provides policy makers anecdotal accounts of business activity from the Fed districts. Reports on third-quarter gross domestic product and November non-farm payrolls are also due this week.

“There’s trepidation building with the employment numbers coming on Friday,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by phone. “There’s nervousness that maybe the Fed takes a more hawkish tone at its December meeting if the jobs numbers are stronger than consensus estimates.”

Valuations Rise

The S&P 500 has added 26 percent this year, challenging 2003 for the best annual gain in 15 years, after the Fed refrained from trimming its monthly bond purchases and corporate earnings have surpassed estimates.

The rally has pushed valuations higher, with the gauge trading for about 16.9 times its companies’ reported earnings, up 19 percent from the beginning of the year when it traded at 14.2 times profit.

“For the coming months, markets will be hesitating, and we expect volatility amid expectations of Fed tapering,” Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg, said by telephone. “The rebound in equity markets has been quite impressive, particularly in the U.S., so we expect some pause.”

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