Markets finally finished in the green on Friday after
Congressional leaders hinted that the "fiscal cliff" meeting with
President Barack Obama had gone well. Benchmarks have taken a
battering ever since this problem came to the forefront, but a
positive outcome on Friday instantly steered the benchmarks out
of four days of consecutive losses. However, the gains on Friday
were not sufficient to completely erode the week's
losses.
The Dow Jones Industrial Average (DJI) gained 0.4% and closed
at 12,588.31. The Standard & Poor 500 (S&P 500) ended
0.5% higher at 1,359.88. The tech-laden Nasdaq Composite Index
added 0.6% to finish Friday's trading session at 2,853.13. The
fear-gauge CBOE Volatility Index (VIX) slumped 8.9% to settle at
16.41. Advancers easily outpaced the decliners on the New York
Stock Exchange (NYSE); as for 73% stocks that gained, 25% stocks
closed lower. Total volume on the NYSE was 4.1 billion
shares.
The gains, which were mostly a result of "constructive
discussions" at the White House regarding the fiscal cliff, were
not enough to steer markets out of weekly losses. Through the
week, investor sentiment had been bogged down due to
apprehensions over this issue. For the week, the Dow, S&P 500
and Nasdaq lost 1.8%, 1.5% and 1.8%, respectively. In fact,
investors have been worried about the fiscal cliff since Election
Day and benchmarks have lost roughly 5% from November
4.
If Washington fails to reach a deal regarding tax hikes and
budget cuts, experts project that the economy may slip into
another recession. The $600 billion deficit reduction plan is
slated to be effective by the start of 2013. Thus, leaders need
to take effective measures to avoid the fiscal cliff at the
earliest. Fortunately, the recent White House meeting offered
hope after Senate Majority Leader Harry Reid and House Speaker
John Boehner spoke of "constructive" discussions. Though Friday's
gains failed to save markets from suffering weekly losses,
optimism about a timely resolution to the fiscal cliff helped
benchmarks rebound from the day's initial declines.
At the meeting, Democrats supported the spending cuts and
Republicans were ready to put "revenue on the table". Striking a
positive note and highlighting constructive discussions, House
Speaker John Boehner commented: "It is going to be incumbent for
my colleagues to show the American people that we're serious
about cutting spending and solving our fiscal dilemma… I believe
that we can do this and avert the fiscal cliff that right in
front of us today".
On the other hand, the situation remained tense in the Middle
East. Reportedly, areas near Jerusalem and Tel Aviv were hit by
Palestinian missiles. The attack on Jerusalem came decades after
the last such incident was noted during the 1967 Middle East war.
The violence in the Middle East gave birth to apprehensions over
oil supplies being affected. On the New York Mercantile Exchange,
crude futures for December delivery jumped 1.4% to $86.67 per
barrel.
The energy sector added modest gains and the Energy Select
Sector SPDR (XLE) was up 0.4%. Among the energy stocks, Chevron
Corporation (NYSE:
CVX
), Exxon Mobil Corporation (NYSE:
XOM
), ConocoPhillips (NYSE:
COP
), Western Refining, Inc. (NYSE:
WNR
) and Marathon Oil Corporation (NYSE:
MRO
) added 0.8%, 0.4%, 0.8%, 1.2% and 1.1%, respectively.
Separately, the Board of Governors of the Federal Reserve
System reported a 0.4% drop in industrial production in October.
The decline came after a 0.2% rise in September and was contrary
to consensus estimates of a 0.1% gain. Hurricane Sandy seems to
have had its impact and its effect will be felt in several
sectors. In keeping with this theme, the report stated:
"Hurricane Sandy, which held down production in the Northeast
region at the end of October, is estimated to have reduced the
rate of change in total output by nearly 1 percentage point. The
largest estimated storm-related effects included reductions in
the output of utilities, of chemicals, of food, of transportation
equipment, and of computers and electronic products".
As for corporate results, tech heavyweight Dell Inc. (NASDAQ:
DELL
) reported a very dismal third-quarter performance. Earnings
slumped heavily from the prior-year quarter and even revenues
dropped over 10% year on year. The fourth-quarter outlook
provided by Dell also disappointed investors as the company
estimated macroeconomic challenges would continue to hurt its
business. Dell's shares slumped 7.3% following the dismal
results. However, the technology sector ended in the green and
the Technology Select Sector SPDR (XLK) added 0.1%. Among the
technology stocks, Apple Inc. (NASDAQ:
AAPL
), International Business Machines Corporation (NYSE:
IBM
), Cisco Systems, Inc. (NASDAQ:
CSCO
), Oracle Corporation (NASDAQ:
ORCL
) and Intel Corporation (NASDAQ:
INTC
) gained 0.4%, 0.6%, 0.3%, 0.2% and 0.8%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis
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CISCO SYSTEMS (CSCO): Free Stock Analysis
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CHEVRON CORP (CVX): Free Stock Analysis
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DELL INC (DELL): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis
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INTEL CORP (INTC): Free Stock Analysis Report
MARATHON OIL CP (MRO): Free Stock Analysis
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ORACLE CORP (ORCL): Free Stock Analysis
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WESTERN REFING (WNR): Free Stock Analysis
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EXXON MOBIL CRP (XOM): Free Stock Analysis
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