MarketView for December 27

MarketView for Thursday, December 27
 

 

 

MarketView

 

Events defining the day's trading activity on Wall Street

 

Lauren Rudd

 

Thursday, December 27, 2012

 

 

Dow Jones Industrial Average

13,096.31

q

-18.28

-0.14%

Dow Jones Transportation Average

5,265.70

q

-22.03

-0.42%

Dow Jones Utilities Average

457.63

q

-0.39

-0.23%

NASDAQ Composite

2,985.91

q

-4.25

-0.14%

S&P 500

1,418.10

q

-1.73

-0.12%

 

 

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.