Fiscal-Cliff Fears, Factory Data Pressure Stocks Lower
It was another back-and-forth session for the
Dow Jones Industrial Average (DJI)
, though the bears eventually prevailed. Stocks erased early gains
on signs of contracting U.S. manufacturing activity, and House
Republicans' budget proposal failed to spark optimism about
bipartisan deal-making. With the clock ticking, the looming fiscal
cliff remained in focus, and the major indexes ended just off
Continue reading for more on today's market events, including :
- Daily Game Plan : Senior Trading Analyst Bryan Sapp explains why you should play this zone in the short term .
- Chart of the Day : Senior Options Strategist Tony Venosa, CMT, is watching this banking bigwig and its dance with a key trendline.
- In Focus : With just a month left before we head over the fiscal cliff, here's your contrarian guide to a December to remember .
- Everything You Need to Know : Your one-stop shop for levels to watch, economic data, earnings reports, stocks on the move, and commodities action.
The Dow Jones Industrial Average (DJIA) started off strong, but blazed a path lower as the session progressed. By the close, the blue-chip barometer shed nearly 60 points, or 0.5%, ending its two-day streak atop the 13,000 level. Just eight of the Dow's 30 components avoided the red, with Cisco Systems' ( CSCO ) 0.6% gain leading the seven advancers, and Alcoa ( AA ) finishing flat. Meanwhile, DuPont ( DD ) paced the bearish majority with a 1.7% drop.
The S&P 500 Index (SPX) also turned tail in the first hour of trading, surrendering 6.7 points, or 0.5%, by the close. Likewise, the Nasdaq Composite (COMP) ended near a session low, giving up 8 points, or 0.3%, but maintaining its perch atop the 3,000 level.
The CBOE Market Volatility Index (VIX) , on the other hand, added 4.8% to end north of 16 for the first time since Nov. 16.
A Trader's Take
"The Institute for Supply Management's (ISM) sub-50 manufacturing number came out at 10:00 AM, and that sparked the selling," said Sapp. "Before that the market was up about 0.4%, but we eventually reversed course to finish 0.5% lower. However, even though the market is weak, there are pockets of strength -- you can still pick stocks. Technology was flat on the day, but a few names were up pretty significantly."
Economic and Earnings News
The ISM manufacturing index dropped to 49.5 in November, down from October's reading of 51.7. This move below 50 indicates a shift from expansion to contraction in U.S. factory activity. The magnitude of the decline caught economists off-guard, as the consensus estimate called for a milder pullback to 51.0.
Construction spending rose 1.4% in October to a seasonally adjusted annual pace of $872.14 billion, reported the Commerce Department, besting the average Wall Street estimate for a gain of 0.5%. This marked the biggest monthly jump in construction spending in just over three years.
More Stocks Making News :
- Verizon Communications ( VZ ) earned an upgrade ahead of the bell.
- Intel ( INTC ) , meanwhile, was hit with a price-target cut.
- Boeing (BA) is hoping to avoid a one-day strike.
- Research In Motion (RIMM) was downgraded to "sell" at Canaccord Genuity.
- DreamWorks Animation's (DWA) cinematic flop triggered a negative analyst note.
- Dell (DELL) moved into double digits after Goldman Sachs changed its tune.
For today's activity in commodities, options, and more, head to page 2.
In the Options Pits :
- Facebook (FB) fans scooped up front-month calls.
- Fifth Third Bancorp (FITB) shareholders may be bracing for a pullback.
- Procter & Gamble (PG)) was also popular among protective put buyers.
- General Electric (GE) garnered attention from put writers.
- Advanced Micro Devices (AMD) received a vote of confidence from the options crowd.
- Qihoo 360 Technology (QIHU) calls were in high demand.
- Sprint Nextel (S) speculators scooped up out-of-the-money puts.
- These two steel stocks were trending in the options arena.
- United Continental (UAL) was targeted for an anti-volatility play.
Crude futures extended their winning streak to a third straight session, as an ailing greenback translated into a boon for dollar-denominated commodities. Furthermore, solid manufacturing data out of China helped to offset lackluster factory activity at home. By the close, January-dated oil tacked on 18 cents, or 0.2%, to finish at $89.09 per barrel.
Dollar weakness also lifted gold futures, as did "safe haven" demand amid fiscal-cliff uncertainty. By the time the dust settled, gold for February delivery advanced $8.40, or 0.5%, to end at $1,721.10 an ounce.
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