Investor apprehensions about the Fiscal Cliff once again
dented the benchmarks on Friday. The S&P 500 and the Dow
Jones posted their first weekly declines in a month. Meanwhile,
industrial production surged in November, whereas consumer price
index declined in November. Separately, China's manufacturing
sector hit a 14-month high in December. The technology sector was
the biggest loser, while the materials sector was the only gainer
among the S&P 500 industry groups.
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The Dow Jones Industrial Average (DJI) lost 0.3% to close the day
at 13,135.01. The Standard & Poor 500 (S&P 500) dropped
0.4% to finish Friday's trading session at 1,413.58. The
tech-laden Nasdaq Composite Index slipped 0.7% to end at
2,971.33. The fear-gauge CBOE Volatility Index (VIX) added 2.7%
to settle at 17.00. Consolidated volumes on the New York Stock
Exchange, American Stock Exchange and Nasdaq were roughly 5.8
billion shares, significantly lower than the daily average of
6.52 billion shares. Declining stocks outpaced advancers on the
NYSE; as for 51% stocks that fell, 45% stocks moved higher.
Benchmarks closed in the red on Friday and also registered their
first weekly fall in a month. Investor concerns about a timely
solution of the Fiscal Cliff dilemma overshadowed encouraging
domestic and international economic reports in the previous week.
For the week, the blue-chip index fell 0.2%, the S&P 500
declined 0.3% and the Nasdaq slipped 0.2%.
President Barack Obama and House of Representatives Speaker John
Boehner met on Thursday to discuss the Fiscal Cliff issue.
Treasury Secretary Timothy Geithner was also present at the
meeting. President Obama said: "I'm willing to do a lot more cuts
in spending. We also need to pair it up with a little more
revenue." The Fiscal Cliff of $600 billion in spending cuts
and tax increase will take effect from the beginning of 2013 if
Congress fails to reach a deal.
Meanwhile, industrial production rebounded from the previous
month's fall and surged 1.1% in November. This was well above
consensus estimates of an increase of 0.1%. According to the
Board of Governors of the Federal Reserve System, November's gain
was mostly boosted by a recovery in production for those
industries which were badly affected by Hurricane Sandy.
Manufacturing activity increased 1.1% in November following a
1.0% decline in October. Utilities posted a gain of 1.0%, whereas
productions at mines surged 0.8%.
The U.S. Bureau of Labor Statistics reported that the seasonally
adjusted Consumer Price Index for All Urban Consumers decreased
0.3% in November, wider than consensus estimates of a decline of
0.2%. The consumer price index posted its first decline in six
months. The energy index tumbled 4.1% in November while the food
index gained 0.2% in November.
On the international front, the Street received encouraging
economic data from China. According to HSBC, China's
preliminary Purchasing Manger Index increased to 50.9 in
December. The world's second largest economy's manufacturing
activity grew at its fastest pace in 14 months. However, because
of the greater focus on the Fiscal Cliff issue, investors chose
to ignore this promising report.
The technology sector had a bad run and the Technology SPDR (XLK)
lost 0.9%. Stocks such as Apple Inc. (NASDAQ:
), Dell Inc. (NASDAQ:
), SanDisk Corporation (NASDAQ:
), Digi International Inc. (NASDAQ:
) and Microsoft Corporation (NASDAQ:
) tumbled 3.8%, 1.0%, 1.2%, 0.7% and 1.1%, respectively.
The materials sector was the only gainer among the S&P 500
industry groups. The Materials Select Sector SPDR (XLB) gained
0.7%. Stocks such as PPG Industries, Inc. (NYSE:
), RPM International Inc. (NYSE:
), The Valspar Corporation (NYSE:
), Sherwin-Williams Company (NYSE:
) and The Dow Chemical Company (NYSE:
) jumped 3.8%, 1.4%, 1.3%, 0.7% and 1.3%, respectively.