Investor fears about the Fiscal Cliff dilemma and a decline in
consumer confidence dragged the benchmarks into negative
territory on Thursday. Benchmarks ended in the red for the fourth
consecutive day. Consumer confidence dropped to its lowest level
since August in December. Meanwhile, a couple of positive
domestic reports were released. Initial claims dropped during the
previous week and new home sales increased in November. The
materials sector was the biggest loser among the S&P 500
industry groups.
The Dow Jones Industrial Average (DJI) lost 0.1% to close the day
at 13,096.31. The Standard & Poor 500 (S&P 500) shed 0.1%
to finish yesterday's trading session at 1,418.10. The tech-laden
Nasdaq Composite Index slipped 0.1% to end at 2,985.91.The
fear-gauge CBOE Volatility Index (VIX) lost 0.1% to settle at
19.47. Consolidated volumes on the New York Stock Exchange,
American Stock Exchange and Nasdaq were roughly 5.18 billion
shares, considerably lower than the daily average of 6.48 billion
shares. Declining stocks outpaced advancers on the NYSE; as for
53% stocks that fell, 44% stocks moved higher.
Most stocks were oscillating between small gains and losses in
the opening session. But benchmarks fell sharply after Senate
Majority leader Harry Reid made discouraging comments on the
Fiscal Cliff issue. In the afternoon benchmarks declined more
than 1% but pared most of their losses before the closing bell
after the House of Representatives Speaker John Boehner said the
House would meet gain on Sunday to resolve the Fiscal Cliff
issue.
Democrats and Republicans are still very far away from sealing a
deal on the Fiscal Cliff issue. Senate Majority leader Harry Reid
said it is likely that Congress will not be able to resolve the
Fiscal Cliff issue before January 1. Harry Reid also blamed
Boehner for not immediately calling the House to meet again. If
Congress fails to resolve the Fiscal Cliff dilemma in few days
then it will take effect from Tuesday and may result in a
recession.
President Barack Obama has returned from Hawaii and has called
Congress leaders to discuss the Fiscal Cliff issue. This will be
President Obama's first meeting with Congressional leaders since
November 16. Senate Minority Leader Mitch McConnell said: "We'll
see what the president has to propose. Members on both sides of
the aisle will review it, and then we'll decide how best to
proceed."
Meanwhile, the uncertainty surrounding the Fiscal Cliff issue has
not only dented the growth of markets but also affected the
confidence of consumers. The consumer confidence index declined
to 65.1 in December from the revised November figure of 71.5.
This was well below consensus estimates of 71. The Expectations
index fell sharply to 66.5 from 80.9 whereas the Present
Situation index surged to 62.8 from the previous month's figure
of 57.4.
Additionally, the U.S. Department of Labor revealed that the
number of Americans filing for unemployment benefits declined
during the previous week. According to the report, the advance
figure of seasonally adjusted initial claims declined 12,000 to
350,000 for the week ending December 22 from the prior week's
revised figure of 362,000. This was below consensus estimates of
358,000. The four-week moving average declined to 356,750, its
lowest point since March 2008.
The street received yet another encouraging report from housing
sector. The U.S. Census Bureau and the Department of Housing and
Urban Development jointly reported new home sales data which
noted that an increase in new home sales occurred in November.
According to the report, sales of new single-family houses
increased 4.4% to a seasonally adjusted annual rate of 377,000
from the revised October figure of 361,000. The November figure
of new home sales is below consensus estimates of 379,000. In
recent days, encouraging economic reports have had hardly any
effect on the markets. Investors are only paying heed to
developments regarding the Fiscal Cliff issue.
The materials sector was the biggest loser among the S&P 500
industry groups and the Materials Select Sector SPDR (XLB) lost
0.4%. Stocks such as The Dow Chemical Company (NYSE:
DOW
), PPG Industries, Inc. (NYSE:
PPG
), Monsanto Company (NYSE:
MON
), American Vanguard Corp. (NYSE:
AVD
) and Ashland Inc. (NYSE:
ASH
) slipped 0.9%, 1.2%, 0.1%, 1.9% and 0.3%, respectively.
ASHLAND INC (ASH): Free Stock Analysis Report
AMER VANGUARD (AVD): Free Stock Analysis
Report
DOW CHEMICAL (DOW): Free Stock Analysis
Report
MONSANTO CO-NEW (MON): Free Stock Analysis
Report
PPG INDS INC (PPG): Free Stock Analysis
Report
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