Investor optimism about a timely solution to the Fiscal Cliff
dilemma coupled with expectations of new Treasury bond purchases
pushed the benchmarks higher. The Federal Reserve started its
two-day policy meeting on Tuesday, at the end of which a new
round of bond purchases is likely to be announced. While the Dow
and the S&P 500 finished higher for the fifth consecutive
day, it was also the S&P 500's best day this month. All ten
of the S&P 500 industry groups finished in the green and
technology emerged as the biggest gainer.
The Dow Jones Industrial Average (DJI) gained 0.6% to close the
day at 13,248.44. The Standard & Poor 500 (S&P 500) rose
0.7% to finish yesterday's trading session at 1,427.84. The
tech-laden Nasdaq Composite Index jumped 1.2% to end at 3,022.30.
The fear-gauge CBOE Volatility Index (VIX) tumbled 3.0% to settle
at 15.57. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and Nasdaq were roughly 6.43 billion
shares, slightly lower than the daily average of 6.5 billion
shares. Advancing stocks easily outpaced decliners on the NYSE;
as for 66% stocks that rose, only 31% stocks moved lower.
Benchmarks began yesterday's trading session on a positive note
banking on hopes that Congress will strike a deal on time about
the Fiscal Cliff issue. In the early part of trading, the
blue-chip index had gained as much as 137 points. However, some
of those gains were eroded after U.S. Senate Majority Leader
Harry Reid's discouraging comments on the issue.
President Barack Obama and House of Representatives Speaker John
Boehner had a telephonic conversation about the Fiscal Cliff.
According to White House and Congressional aides, President Obama
sent a revised offer and Boehner also reciprocated with a counter
proposal on Tuesday. However, none of the two shared any details
about the proposal. Boehner said: "We're still waiting for the
White House to identify what spending cuts the president is
willing to make as part of the balanced approach that he promised
the American people."
However, U.S. Senate Majority Leader Harry Reid said it will be
very difficult for Congress to strike a deal before Christmas.
The $600 billion in tax increases and spending cuts will take
effect from the beginning of 2013 if Congress fails to strike a
deal. According to experts, if this takes effect then it will
push the economy back into recession.
Meanwhile, the Federal Reserve began its two-day meeting on
Tuesday. Under the ongoing program called "Operation Twist", the
Fed has been buying $45 billion in long-term bonds, while selling
the same amount in short term debt in another bid to decrease the
rates. Investors are expecting that the central bank will
announce a new round of bond buying to replace "Operation Twist",
which will expire at the end of the year.
The October trade deficit moved up to $42.2 billion from the
revised September figure of $40.3 billion. This was below
consensus estimates of $42.6 billion. According to the U.S.
Census Bureau and the U.S. Bureau of Economic Analysis, October
exports were recorded $6.8 billion less than September exports of
$187.3 billion. October imports decreased $4.9 billion from
September imports of $227.6 billion.
The technology sector enjoyed a good run for the second
consecutive day. The Technology SPDR (XLK) gained 1.3% and was
the biggest gainer among the S&P 500 industry groups. Stocks
such as Apple Inc. (NASDAQ:
AAPL
), Hewlett-Packard Company (NYSE:
HPQ
), Dell Inc. (NASDAQ:
DELL
), Microsoft Corporation (NASDAQ:
MSFT
) and Google Inc (NASDAQ:
GOOG
) surged 2.2%, 0.7%, 0.4%, 1.4% and 1.7%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
Report
HEWLETT PACKARD (HPQ): Free Stock Analysis
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MICROSOFT CORP (MSFT): Free Stock Analysis
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