January 3rd, 2013

S&P 500 Futures – U.S. stocks fell, after the biggest gain in a year for the Standard & Poor’s 500 Index, as concern the budget deal won’t reduce the deficit fast enough offset a better-than-forecast jobs report and a rally among retailers.

Family Dollar Stores Inc. (FDO) tumbled 11 percent after forecasting second-quarter earnings that missed estimates. Biogen Idec Inc. declined 3.4 percent after saying its experimental drug for amyotrophic lateral sclerosis failed to help patients in a clinical trial. Ross Stores Inc. and TJX Cos. jumped at least 3.7 percent as consumer-discretionary companies rallied amid same-store sales that topped estimates.

The S&P 500 dropped 0.1 percent to 1,461.22 at 11:01 a.m. in New York. The Dow Jones Industrial Average fell 19.50 points, or 0.2 percent, to 13,393.05 today. Trading in S&P 500 companies was 17 percent above the 30-day average at this time of day.

“As we look forward into the next two months, there’s going to be a lot of uncertainty over issues that are more pressing than the fiscal cliff,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4.5 billion in Raleigh, North Carolina, said in a telephone interview. “We may have a sloppy, volatile market.”

The S&P 500 surged 2.5 percent yesterday, the most since December 2011, as lawmakers passed a bill averting spending cuts and tax increases scheduled to come into effect this year. After this week’s deal to avoid the so-called fiscal cliff, investors are turning their attention to impending confrontations between congressional Republicans and the White House over spending.

Spending Cuts

Lawmakers may need to approve an increase in the $16.4 trillion debt ceiling as early as mid-February, with Republicans planning use the vote to force President Barack Obama to accept cuts in entitlement programs such as Medicare. Another showdown might emerge in early March, when Congress must confront the $110 billion in automatic spending cuts that were put off in the Jan. 1 tax deal.

The budget agreement passed by Congress on Jan. 1 won’t lower the country’s deficit enough to avoid a sovereign-rating downgrade, Moody’s Investors Service said yesterday. Moody’s, which has assigned its top Aaa ranking for the U.S., has a negative outlook on the world’s biggest economy, as does Fitch Ratings.

Jobs Data

Equities pared losses after a private report showed companies added 215,000 workers in December. The increase was higher than projected, data from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 36 economists surveyed by Bloomberg called for an advance of 140,000.

More Americans than forecast filed claims for unemployment insurance payments last week as the closing of some state agencies during the holidays prompted the government to estimate some figures. Applications for jobless benefits increased 10,000 to 372,000 in the week ended Dec. 29, the Labor Department reported. Economists forecast 360,000 claims, according to the median estimate in a Bloomberg survey.

The Labor Department will tomorrow release its payrolls report for December. The median forecast of economists in a Bloomberg survey projects a gain of 150,000 workers, following an increase of 146,000 in November. The unemployment rate held at 7.7 percent, the lowest since December 2008, according to economists’ estimates.

Family Dollar

Family Dollar plunged 11 percent, the biggest decline in the S&P 500, to $56.69. The discount-store chain forecast earnings in the second quarter will be no more than $1.28 a share, falling short of the $1.39 profit projected by analysts on average. Dollar General Corp. (DG) also fell, losing 2.7 percent to $41.75.

Biogen lost 3.4 percent to $144.98. The third-biggest biotechnology company’s drug, dexpramipexole, was in the third and final stages of clinical trials generally required for approval. It didn’t show any efficacy in improving patients’ function or survival, Biogen said in a statement today.

General Growth Properties Inc. (GGP) slid 3.1 percent to $19.42 after Pershing Square Capital Management LP, its second-largest shareholder, gave up its demand for the sale of the company. GGP’s biggest investor, Brookfield Asset Management Inc., will buy warrants for 18.4 million shares of the second-biggest U.S. mall owner from Pershing, according to a statement today.

Ross and TJX reported December same-store sales that topped analysts’ estimates as retailers kept inventories lean in a tepid holiday season and attracted shoppers with last-minute discounts. Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics were estimated to rise 3.4 percent, excluding drugstores, the firm said in a report. That follows a 1.6 percent gain in November.

Ross, TJX

Ross rallied 6.5 percent to $57.98, while TJX advanced 3.7 percent to $44.76. Consumer discretionary stocks increased 0.4 percent as a group.

Limited Brands Inc. sank 5.7 percent to $44.68. The retailer that owns the Victoria’s Secret and Bath and Body Works brands said comparable store sales increased 3 percent in December, trailing the average analyst estimate of 4.7 percent.

Hormel Foods Corp. jumped 5.1 percent to $33.63. The maker of Spam lunchmeat agreed to buy the Skippy peanut-butter business from Unilever for about $700 million, expanding its presence beyond meats and further into China.

Landec Corp. (LNDC) surged 20 percent to $11.75 after the maker of packaged food products raised its sales outlook. Revenue in 2013 will grow by 33 percent to 38 percent from a year earlier, higher than its Oct. 16 forecast of 30 percent. Analysts on average had projected a 33 percent increase.

- Inyoung Hwang in New York at Bloomberg.