Talks between Democrats and Republicans on the Fiscal Cliff
issue took a negative turn, dragging the benchmarks into the red.
Benchmarks posted their first weekly losses after rallying for
two consecutive days. Housing starts declined in November,
whereas building permits hit its highest level in more than four
years. All ten of the S&P 500 industry groups ended in the
red and the health care sector emerged as the biggest loser.
The Dow Jones Industrial Average (DJI) lost 0.7% to close the
day at 13,251.97. The Standard & Poor 500 (S&P 500)
dropped 0.8% to finish yesterday's trading session at 1,435.81.
The tech-laden Nasdaq Composite Index slipped 0.3% to end at
3,044.36. The fear-gauge CBOE Volatility Index (VIX) surged 11.5%
to settle at 17.36. Consolidated volumes on the New York Stock
Exchange, American Stock Exchange and Nasdaq were roughly 6.9
billion shares, higher than the daily average of 6.4 billion
shares. The number of decliners and advancers were the same on
the NYSE.
Benchmarks ended their two-day advance as investors remained
apprehensive about the Fiscal Cliff issue. The S&P 500 had
rallied over 2% in the last two days and touched its highest
level in two months. In recent days, investors focus is centered
around the Fiscal Cliff issue. Thus, any development on this
front decides the movement of the markets.
House of Representatives Speaker John Boehner had earlier
proposed "Plan B", which stated that people earning above $1
million will have to pay higher tax rates. However, President
Barack Obama disapproves of this plan. As for the recent
development, speaking at a press conference, Boehner said:
"Tomorrow, the House will pass legislation to make permanent tax
relief for nearly every American-99.81 percent of the American
people…Then the president will have a decision to make: He can
call on Senate Democrats to pass that bill or he can be
responsible for the largest tax increase in American
history."
However, if Congress passes the Republican "Plan B" then Obama
plans to veto the legislation. White House Communications
Director Dan Pfeiffer said: "This approach does not meet the test
of balance, and the President would veto the legislation in the
unlikely event of its passage." However, President Obama said he
is hopeful that a deal will be reached before Christmas. Obama
also said he and Boehner will have to reduce a gap of "a few
hundred billion dollars" to solve the Fiscal Cliff issue.
Meanwhile, the U.S. Census Bureau and the Department of
Housing and Urban Development jointly announced that building
permits increased in November by 31,000 to a seasonally adjusted
annual rate of 899,000 from revised October figure of 868,000.
This was above consensus estimates of 872,000. However, the
report also mentioned that housing starts decreased by 3.0% to a
seasonally adjusted annual rate of 861,000 from the revised
October figure of 868,000. This was below consensus estimates of
875,000.
The SPDR S&P Homebuilders (XHB) fell 0.5% following the
mixed report on the housing sector. Stocks such as Toll Brothers
Inc (NYSE:
TOL
), PulteGroup, Inc. (NYSE:
PHM
), KB Home (NYSE:
KBH
), The Ryland Group, Inc. (NYSE:
RYL
) and Lennar Corporation (NYSE:
LEN
) slipped 1.3%, 0.8%, 2.0%, 0.5% and 1.1%, respectively.
The health care sector was the biggest loser among the S&P
500 industry groups. The Health Care SPDR (XLV) lost 1.1%. Stocks
such as Pfizer Inc. (NYSE:
PFE
), GlaxoSmithKline plc (NYSE:
GSK
), Mylan Inc. (NASDAQ:
MYL
), Bristol Myers Squibb Co. (NYSE:
BMY
) and Johnson & Johnson (NYSE:
JNJ
) dropped 1.1%, 0.7%, 2.0%, 1.4% and 0.5%, respectively.
BRISTOL-MYERS (BMY): Free Stock Analysis
Report
GLAXOSMITHKLINE (GSK): Free Stock Analysis
Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis
Report
KB HOME (KBH): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis
Report
MYLAN INC (MYL): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
Report
RYLAND GRP INC (RYL): Free Stock Analysis
Report
TOLL BROTHERS (TOL): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research