Benchmarks lost most of the gains that were propelled by the
central bank's announcement of a new stimulus plan and ended
nearly flat. Federal Reserve Chairman Ben Bernanke said monetary
policy actions were insufficient to negate the Fiscal Cliff's
effects. This statement robbed the market of its gains. The
S&P 500 finished in the green for the sixth consecutive day.
The materials sector was a major loser, whereas energy was the
biggest gainer among the S&P 500 industry groups.
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The Dow Jones Industrial Average (DJI) lost 0.02% to close the
day at 13,245.45. The Standard & Poor 500 (S&P 500)
gained 0.04% to finish yesterday's trading session at 1,428.48.
The tech-laden Nasdaq Composite Index shed 0.3% to end at
3,013.81. The fear-gauge CBOE Volatility Index (VIX) climbed 2.4%
to settle at 15.95. Consolidated volumes on the New York Stock
Exchange, American Stock Exchange and Nasdaq were roughly 6.58
billion shares, slightly higher than the daily average of 6.52
billion shares. Declining stocks outpaced advancers on the NYSE;
as for 50% stocks that fell, 47% stocks moved higher.
As expected, the U.S. Federal Reserve announced a new bond buying
plan yesterday. Federal Reserve Chairman Ben Bernanke said the
central bank will replace the ongoing "Operation Twist" with the
new plan. Under "Operation Twist", the Fed has been buying $45
billion in longer-term bonds, while selling the same amount in
short-term debt in another bid to decrease rates.
The Federal Reserve said that in order to boost the economy and
lower the longer-term borrowing costs, it will spend $85 billion
a month on bond buying. The Fed will spend $45 billion to buy
long-term treasuries in addition to the $40 billion per month in
mortgage-backed bonds. Fed also said it will continue to maintain
short-term interest rate at near zero levels till the U.S.
unemployment rate dropped below 6.5%.
However, much of the optimism following the announcement of the
plan was eroded after Ben Bernanke's comments on the Fiscal
Cliff. The Fed chairman said actions taken by the central bank
were insufficient to negate impact of the Fiscal Cliff of $600
billion in tax increase and spending cuts completely. Bernanke
hoped for a quick solution to the Fiscal Cliff issue and said:
"I'm hoping that Congress will do the right thing on the fiscal
Separately, House of Representatives Speaker John Boehner said:
"There were some offers exchanged back and forth yesterday and,
you know, the president and I had a pretty frank conversation
about just how far apart we are." He also said: "The longer the
White House slow-walks this discussion, the closer our economy
gets to the fiscal cliff and the more American jobs are placed in
jeopardy." The crisis will make its impact felt from the
beginning of 2013 if Congress fails to seal a deal on the Fiscal
The energy sector was the biggest gainer among the S&P 500
industry groups and the Energy Select Sector SPDR (XLE) gained
0.4%. Stocks such as Exxon Mobil Corporation (NYSE:
), Chevron Corporation (NYSE:
), TOTAL S.A. (NYSE:
), Marathon Oil Corporation (NYSE:
) and Royal Dutch Shell plc (NYSE:RDS.A) surged 0.5%, 0.3%, 1.6%,
1.0% and 1.2%, respectively.
The materials sector had a bad run and the Materials Select
Sector SPDR (XLB) lost 0.3%. Stocks such as PPG Industries, Inc.
), RPM International Inc. (NYSE:
), The Valspar Corporation (NYSE:
), Sherwin-Williams Company (NYSE:
) and PolyOne Corporation (NYSE:
) tumbled 0.4%, 0.6%, 1.1%, 1.3% and 2.4%, respectively.