Jeremy Herron and Oliver Renick
(Bloomberg) -- U.S. stocks retreated, whittling down their November advance as investors prepared for a raft of economic data due this week along with policy decisions from central banks.
Consumer stocks led the Standard & Poor’s 500 Index lower, trimming its gain in November to 0.1 percent. The euro capped its worst month versus the dollar since March on prospects Europe will bolster economic stimulus just as the U.S. considers tightening policy. The yield gap between German and American bonds widened to the most in nine years, as emerging-market stocks posted their biggest monthly slump since September. The yuan rallied after the IMF said it will be added to its basket of reserve currencies.
Economists surveyed by Bloomberg are unanimously predicting that the European Central Bank will expand monetary accommodation this week, highlighting its policy divergence with the Federal Reserve as odds of a U.S. interest-rate increase in December hold above 70 percent. The prospect of an end to America’s era of near-zero borrowing costs has propelled the greenback to its best month since July while weighing on assets from gold to developing-nation stocks. OPEC members also meet this week.
“This is a fairly big week between the ECB Thursday and the jobs number on Friday,” Mark Kepner, an equity trader at Chatham, New Jersey-based Themis Trading LLC, said by phone, referring to American payrolls data. “These are going to be a pivotal two weeks to set us up through the end of the year.”
Compared with where they were leading up to the last Fed meeting in October, U.S. equities are in a much improved state. At the start of that month, the S&P 500 was still down 8.6 percent from its August high. Three weeks ahead of the forthcoming meeting, shares in the benchmark gauge are back in the range they were trading in weeks before the correction started.
In addition to the ECB’s policy decision Thursday, Fed Chair Janet Yellen will appear before Congress ahead of the payrolls report.
The S&P 500 fell 0.5 percent to 2,080.41 as of 4 p.m. in New York. It’s lackluster performance in November comes on the heels of an 8.3 percent surge in October, as shares rallied from the third-quarter selloff.
The U.S. benchmark has eked out gains as signs of a strengthening economy offset concerns over the Fed’s plans to raise rates, throttling back on stimulus that has underpinned the 6 1/2 year equities bull market. Mounting speculation policy will be tightened this year boosted financial shares by 1.7 percent in November, while utility stocks tumbled 2.8 percent.
“We’re treading waters for now as the markets are waiting for the central banks’ decisions,” said Benedict Goette, the Zurich-based founder of asset-management firm Compass Capital, currently merging with Crossbow Partners. “A Fed hike is pretty much priced in by now, so equities will probably trade in a tight range.”
The lull in the stock market is continuing after light trading around last week’s Thanksgiving holiday left U.S. equities little changed last week. Energy companies reversed Friday’s declines on Monday as oil swung between gains and losses, while health-care shares retreated. Retailers and apparel companies sank amid signs traffic at bricks-and-mortar stores was down for the Black Friday sales.
The Stoxx Europe 600 Index climbed 0.5 percent Monday to cap a 2.7 percent monthly gain after rising 8 percent in October. Carmakers led the advance in November with an 8.3 percent advance, while resource producers fell 6.5 percent. The MSCI Asia Pacific Index slipped 2 percent in the month.