Benchmarks took a battering on Wednesday after President
Barack Obama stood firm on increasing tax rates for rich
Americans and violence broke out in the Middle East. Moreover,
investors' apprehensions about the fiscal cliff pushed The Dow
Jones to its lowest level since June. Meanwhile, U.S. retail
sales fell in October following three months of gains. The
industrial and the financial sectors were the major losers among
the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) dropped 1.5% to close
the day at 12,570.95. The Standard & Poor 500 (S&P 500)
declined 1.4% to finish yesterday's trading session at 1,355.49.
The tech-laden Nasdaq Composite Index shed 1.3% to end at
2,846.81. The fear-gauge CBOE Volatility Index (VIX) surged 7.6%
to settle at 17.92. Consolidated volumes on the New York Stock
Exchange, American Stock Exchange and Nasdaq were roughly 7.4
billion shares, significantly higher than the daily average of
6.51 billion shares. Declining stocks easily outpaced the
advancers on the NYSE; as for 88% stocks that fell, only 10%
stocks moved higher.
The bearish sentiment in the markets over apprehensions
surrounding the impending fiscal cliff pushed the benchmarks
lower yesterday. The Dow fell as much as 200 points after
President Barack Obama once again emphasized the need to raise
tax rates for rich Americans. The blue-chip index has reached its
lowest level since June 26 whereas the S&P 500 has dropped to
a level last observed in late July. Markets were also affected by
violence in the Middle East where Israel attacked Palestinian
militants in Gaza and killed the leader of the Hamas militant
Meanwhile, President Barack Obama met business executives at
the White House to discuss the impending fiscal cliff. After
meeting with Obama, business executives pleaded the President and
Congress to avoid the fiscal cliff; otherwise it could lead to
severe implications for consumer spending and business. After two
back-to-back meetings with labor and civic leaders and now
business executives, the President is scheduled to meet
Republican House Speaker John Boehner and top Republican and
Democratic leaders on Friday at the White House.
Alan Mulally, CEO of Ford Motor Company (NYSE:
), who was one among the twelve business executives who met
President Obama has said: "Our country needs a bipartisan
solution for the 'fiscal cliff' that promotes jobs and economic
growth now, and avoids damage to a still fragile economy."
President Obama said a modest increase in tax rate for wealthy
Americans "will not break their backs" ant this will not affect
the business investment climate.
Meanwhile, The U.S. Census Bureau released retail sales data
which revealed that advance retail sales numbers fell 0.3% in
October to $411.6 billion from the previous month but were up
3.8% from the year-ago period. The October figure was above
consensus estimates of -0.2%. Non store retail sales surged
7.2% from the previous year. According to the commerce
department, a decrease in retail sales indicated that Americans
are still concerned about the economy's problems.
Coming to corporate earnings, Cisco Systems, Inc. (NASDAQ:
) surged 4.8% after the company reported first-quarter results
which came above street estimates. Profits and revenue were both
higher than analyst estimates. Better-than-expected results from
Cisco pushed the markets into the green for a short period.
Abercrombie & Fitch Co. (NYSE:
) also posted quarterly results which revealed that net income
surged 40% in the third-quarter, above analysts' estimates.
Shares of the company jumped
The financial sector had a bad run and the Financial Select
Sector SPDR tumbled 1.7%. Stocks such as Stocks such as JPMorgan
Chase & Co. (NYSE:
), Citigroup Inc. (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), Bank of America Corp (NYSE:
) and Wells Fargo & Company (NYSE:
) lost 1.9%, 3.2%, 1.9%, 3.6% and 1.8%, respectively.
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