Daily Data Flow: U.S. Stocks Drop; Fixed Income Dangers; Japanese Stocks on High

Stocks Drop Amid Budget Deadlock; Treasuries, Gold Fall (Bloomberg)
U.S. stocks fell, halting a six-day rally in the Standard & Poor’s 500 Index, as the standoff in federal budget negotiations overshadowed a drop in jobless claims and growth in retail sales. Treasuries declined while precious metals led losses in commodities. “We’ve had good economic data yet people are still anxious to see what comes out of the negotiations in Washington,” said Peter Jankovskis, who helps oversee $3 billion of assets as co- chief investment officer at Lisle, Ill.-based Oakbrook Investments LLC. He spoke in a telephone interview. “We’ll see a range-bound market until we get something definitive.”

Why the Rush to Fixed Income May be Dangerous (CNBC)
“We’ve definitely seen a general trend over the course of the last year from equities to fixed income,” said Brad Thompson, CIO of Stadion Money Management in Watkinsville, Ga. “There’s the general conservative nature of many investors in the face of all that’s going on globally.The ‘fiscal cliff’ adds to it. And also you’ve got a lot of people trying to grab yield.” Given the timing of the rush to fixed income ETFs, it appears that worries about presumed higher taxes next year as a result of fiscal cliff negotiations may be the trigger.

Nikkei Touches Eight-month High Above 9,700, but Market May Peak Soon (Reuters)
Japan’s Nikkei average surged above 9,700 for the first time in eight months, led by exporters, as the yen fell to a multi-month low on mounting expectations of aggressive monetary easing by the Bank of Japan after a general election at the weekend. Many expect the market to top out soon as this move has been seen as panic buying.