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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Thursday, December 27, 2012
Summary
The major equity indexes were down for a fourth
consecutive day on Thursday, but recovered much of their losses after
the House of Representatives, in the barest sign of progress, said it
would come back to work on avoiding the "fiscal cliff," Sunday evening. It was a jittery session for stocks, with shares
falling more than 1 percent after Senate Majority Harry Reid warned a
deal was unlikely before the deadline, only to rebound merely on the
news that the House would reconvene Sunday, a day before the December 31
"cliff" deadline. The market has been prone to quick reactions to
headlines and those moves have sometimes seemed more dramatic because of
reduced trading volume. Investors are looking for any hint that
lawmakers will avert the $600 billion in tax hikes and spending cuts
that will start to take effect next week and could push the U.S. economy
into recession. In a sign of the anxiety, the CBOE Volatility Index
rose above 20 for the first time since July, suggesting rising worries,
but ended up finishing the day down 0.4 percent as the stock market
rebounded. Stocks in the materials and the financial sectors,
which are more vulnerable to the economy's performance, bore the brunt
of the selling before recovering. Shares of Bank of America fell 0.6
percent to $11.47, while Freeport-McMoRan Copper & Gold was down 0.7
percent to $33.68. Some of 2012's biggest gainers bucked the broader
trend and rallied; a sign of year-end "window dressing." Expedia was the
S&P 500's top percentage gainer, climbing 4.1 percent to $60.30. The
price of the online travel agency's stock has doubled this year. Marvell Technology fell 3.5 percent to $7.14 after
it said it would seek to overturn a jury's finding of patent
infringement. The stock had fallen more than 10 percent in the previous
session after a jury found the company infringed on patents held by
Carnegie Mellon University and ordered the chipmaker to pay $1.17
billion in damages. The four-day decline marked the S&P 500's longest
losing streak in three months. The index has lost 1.8 percent over the
period as investors grapple with the possibility that a deal may not be
reached until next year. Treasury Secretary Timothy Geithner announced the
first of a series of measures that should push back the date when the
government will hit its legal borrowing authority - a limit known as the
debt ceiling - by about two months. Economic data seemed to confirm worries about the
impact of the fiscal cliff on the economy. The Conference Board, an
industry group, said its index of consumer confidence in December fell
to 65.1 as the budget crisis dented growing optimism about the economy.
The gauge fell more than expected from 71.5 in November. However, the job market continues to mend. Initial
claims for unemployment benefits dropped 12,000 to a seasonally adjusted
350,000 last week and the four-week moving average fell to the lowest
since March 2008. The Commerce Department said new single-family home
sales accelerated in November to a 377,000-unit annual rate while the
median sales price jumped 14.9 percent from the same month in 2011,
signs that the housing recovery is gaining steam. The Chicago Federal Reserve said its index of
factory activity in the U.S. Midwest increased in November to 93.7 from
a revised 92.2 in October. About 5.18 billion shares changed hands on the three
major equity exchanges, a number that was well below the daily average
so far this year of about 6.48 billion shares.
Unemployment Claims at 4 1/2 Year Low
The number of Americans filing new claims for
unemployment aid fell last week to nearly its lowest level in 4 1/2
years, a sign that the labor market is healing. Initial claims for state unemployment benefits
dropped 12,000 to a seasonally adjusted 350,000, the Labor Department
said on Thursday. The prior week's figure was revised to show 1,000 more
applications than previously reported. After spiking in the wake of Sandy, which ravaged
the East Coast in late October, the weekly levels of new claims have now
dropped to their lowest levels since the early days of the 2007-09
recession. The four-week moving average fell 11,250 last week to
356,750, the lowest since March 2008. That suggests the surge in layoffs
since the recession may have run its course, although companies still
are adding to their payrolls at a lackluster pace. The report included a caveat, at least for the
latest week. President Barack Obama declared Monday a holiday for
federal workers and many state offices followed suit and were unable to
provide complete data for last week's jobless claims. Data for 19 states
was estimated, a Labor Department official said. Fourteen of those
states submitted their own estimates, which tend to be fairly accurate
because the state officials work with a significant amount of data, the
Labor Department official said. Besides the federal holiday, there were no special
factors influencing week's claims data, the department official said.
Consumer Confidence Drops
Consumer confidence fell more than expected in
December, hitting a four-month low as a looming fiscal crisis sapped
what had been a growing sense of optimism about the economy. The
Conference Board, an industry group, said its index of consumer
attitudes fell to 65.1 from 71.5 in November. Gauges of business sentiment have weakened recently
on worries about $600 billion in tax hikes and government spending cuts
scheduled for early January. Now consumers also appear apprehensive, a
sign worries about the so-called "fiscal cliff" could bite into
household spending. Also, with business sentiment weakening in recent
months as the fiscal cliff has approached, many economists think hiring
may remain sluggish even as the pace of layoffs ease.
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MarketView for December 27
MarketView for Thursday, December 27