All eyes were on Washington today, as budget talks hit another
obstacle, and President Obama took time out from the fiscal-cliff
wrangling to nominate Senator (and former presidential candidate)
John Kerry, D-Mass., as secretary of state. Meanwhile, sellers were
in control, sending the
Dow Jones Industrial Average (DJI)
into the red by a healthy margin. While there were several economic
data points hitting the newswires, "Although markers quickly
rebounded from what looked to be a massive hit, they were still
firmly in the red from the open and drifted lower for much of the
day," remarked Schaeffer's Senior Equity Analyst Joe Bell.
Continue reading for more on today's market, including
- Baidu (
) is poised to
despite recent gains, according to Senior Options Strategist Tony
- "Why Listening to Price is the Only Way to Go," and other
words of wisdom
culled from Senior Technical Strategist Ryan Detrick, CMT.
- Schaeffer's contributor Adam Warner has a
about the IntercontinentalExchange's (
) buyout of the Big Board.
- Government leaders assigning blame, Ford Motor (
) seeing bullish speculation, and a good rhetorical question in
our Tweet of the day.
Dow Jones Industrial Average (DJIA)
started and ended the day in the red, but the plunge out of the
gate never really intensified. In fact, the worst it got was
shortly before noon, when the index was off 189 points at
13,122.53. The Dow did settle below its 10-day moving average for
the first time since Nov. 16, however, and closed with a loss of
121 points, or 0.9%. Just two names among the Dow 30 -- American
) and McDonald's (
) -- managed to peek into the black, up 0.4% and 0.2%,
respectively, while Bank of America (BAC) paced the declining
majority, losing 2% on the day. For the week, the Dow was 0.4%
S&P 500 Index (SPX)
danced back south of the 1,440 level, shedding 13.5 points, or
0.9%, to bring its weekly gain down to 1.2%. Turning to tech, the
Nasdaq Composite (COMP)
fell 29 points, or 1%, but settled up 1.7% for the week.
CBOE Market Volatility Index (VIX)
had a wild day, trading in a range from 17.76 to 19.93 before
ultimately closing up just 0.9%, or 0.17 point. This week, the VIX
tacked on 4.9% amid rising uncertainty as the end of the year
A Trader's Take
"Markets don't like uncertainty, and it's anyone's guess how
this whole fiscal-cliff negotiation will end," stated Bell. "But
given the overnight price action and the 'mini flash crash' last
night, the fact that the Dow dropped less than 150 points felt like
a small victory. It was also encouraging," he added, "that
small-caps and mid-caps continue to take a leadership role, even on
tough days like today."
3 Things to Know About Today's Market
- The so-called "Plan B" budget proposal, propelled to a House
vote by House Speaker John Boehner, R-Ohio, died before it hit
the floor as it failed to have the support needed to pass. This
latest setback in the fiscal-cliff negotiations caused a ripple
in global markets, as stocks sold off on the news. Meanwhile,
Senate Majority Leader Harry Reid, D-Nev., accused Boehner of
wasting a week's worth of time and stated the obvious: "The only
way to avoid the cliff altogether is for Speaker Boehner to
return to negotiations, and work with President Obama and the
Senate to forge a bipartisan deal."
- Durable goods orders rose 0.7% in November, strongly
exceeding economists' predicted drop of 0.1%. Elsewhere, personal
spending edged 0.4% higher last month, while personal income
advanced 0.6%. Expectations called for a 0.3% increase in
spending and a 0.4% rise in income. Finally, consumer
expectations deteriorated in December amid fiscal-cliff worries.
The Thomson-Reuters/University of Michigan consumer sentiment
index dropped to 72.9 over the past two weeks from 74.5
mid-month, falling short of the consensus estimate of 75.0.
- Massive conglomerate General Electric (GE) is about to get a
little bigger, as it
committed $4.3 billion
to buy the aviation arm of Italy-based Avio. GE hopes the deal
will help grow its supply chain and expand its jet propulsion
... as the era of paperless journalism continues its approach,
magazine announced plans to convert to an all-digital format, after
27 years on the nation's newsstands. The publication -- which
originally debuted as a more "alternative," well,
-- recently underwent steep layoffs and began publishing on a
bimonthly basis versus monthly.
Today's Top Tweet
"Who did a worse job at negotiating, Boehner or the NHL
5 Stocks We Were Watching Today
- Ford Motor (
) option bulls
purchased a longer-term block
- Cisco Systems (CSCO) traders forecast
very limited upside
through the end of next week.
- Long-term bears continued to
- Groupon (GRPN) bulls
ahead of options expiration.
- Bearish option traders in search of their
next trading idea
should look at Activision Blizzard (ATVI).
Question of the Day
: What are the current "circuit breakers" on the Dow?
: Every quarter, the NYSE establishes three "circuit breakers,"
defining levels on the Dow Jones Industrial Average (DJI) at which
trading will be halted on a decline. As of the
fourth quarter of 2012
, these levels on the Dow were 10%, 20%, and 30% lower, or drops of
roughly 1,350, 2,700, and 4,050 points.
A 30% drop precipitates an automatic close of the market for the
remainder of the day, regardless of when the drop occurs. A decline
of 20% before 1:00 p.m. Eastern prompts a two-hour halt; a 20%
pullback at or after 2:00 p.m. results in closure for the remainder
of the day (a drop of 20% between 1:00 and 2:00 p.m. leads to a
one-hour halt). Finally, a 10% drop before 2:00 p.m. results in a
one-hour closure, and between 2:00 and 2:30 p.m. prompts a
half-hour halt. Any time after 2:30 p.m., the market will remain
open on a 10% drop (barring a drop of 20% or more).
For a look at today's options movers and commodities
activity, head to page 2.
February-dated oil futures dropped $1.47, or 1.6%, to settle at
$88.66 per barrel for the day. For the week, however, black gold
rose 2.2%. February gold, however,
2.2% over the week, despite a $14.20 -- or 0.9% -- rise in today's
session to close at $1,660.10 an ounce.
At the end of every market day, the staff at Schaeffer's
Investment Research reviews the trading day in detail, covering
major events and key market developments. Don't miss this
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