While you were sleeping Fed positioning stalls rally

Wednesday 11th December 2013

Stocks on both sides of the Atlantic fell, pushing the Standard & Poor's 500 Index down from a record-high close, as investors positioned themselves ahead of next week's US Federal Reserve meeting.

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.15 percent, the Standard & Poor's 500 Index declined 0.18 percent, while the Nasdaq Composite Index slipped 0.10 percent. Declines in shares of Verizon Communications and Microsoft, both 1.2 percent weaker, propelled the Dow lower.

Even so, the S&P 500 has gained 29 percent in 2013. Concern about whether there's more room to rally is making some investors nervous with the prospect that Fed policymakers, who will begin a two-day meeting on Dec. 17, may start tapering their US$85-billion-a-month bond-buying programme then.

"You have to be impressed at how resilient and how the market has absorbed taper talks," Dan Veru, chief investment officer at Palisade Capital Management, told Reuters. "I do think there has been a bit of ongoing profit taking due to the underlying distrust of this stock market rally."

Not everyone is convinced the Fed will move this month.

"It's going to be a close call in December, but they may just wait until 2014" to begin easing stimulus, Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania, told Reuters.

Lululemon Athletica said it appointed Laurent Potdevin as its new chief executive and that founder Chip Wilson will step down as chairman. Potdevin, president of TOMS Shoes, will replace Christine Day as CEO in January and aims to help the company recover from a product recall earlier this year that damaged the brand. Lululemon shares were last 0.45 percent lower.

"This company has jeopardised its long-term relationship with its customers over the last year, via some product quality issues, via some board communication by the founder," Credit Suisse analyst Christian Buss told Reuters. "What I'll be looking for are signs they can re-engage their customers in a positive way."

Meanwhile, General Motors named Mary Barra as successor to Chief Executive Officer Dan Akerson, who will step down next month. Barra will become the first female CEO of a global car maker. GM shares were last 0.8 percent lower. Late yesterday the US government sold its remaining shares in the company, resulting in a near US$10 billion loss for taxpayers.

In Europe, the Stoxx 600 Index finished the day with a 0.7 percent drop from the previous close. The UK's FTSE 100 fell 0.6 percent, Germany's DAX shed 0.9 percent, while France's CAC 40 sank 1 percent.

Commodities including oil, gold and silver rose today as the greenback fell. WTI for January delivery climbed 1.1 percent to US$98.37 a barrel on the New York Mercantile Exchange. Gold futures for February delivery gained 2.4 percent to US$1,263.90 an ounce on the Comex, while silver futures for March delivery jumped 3.1 percent to US$20.32 an ounce.

BusinessDesk.co.nz

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