MarketView for December 13

Summary  

It was definitely a ho-hum secession on Wall Street with stocks little changed after a three-day drop. However, from on a weekly basis the markets chalked up their worst week in nearly four months on concern that the Federal Reserve could signal the start of a reduction in its stimulus program at its policy-setting meeting next week. For the week, the Dow and the S&P 500 each lost 1.65 percent and the Nasdaq fell 1.52 percent. It was the largest weekly percentage drop for the indexes since August.

Investors pulled $6.51 billion out of stock mutual funds in the week ended Wednesday, representing the biggest weekly outflow this year, according to data from Thomson Reuters' Lipper service.

Yet, in a bullish signal, the S&P 500 closed on Friday right above 1,775 - considered a technical support level. At less than 2 percent below its record closing high, the S&P 500's pullback for the week shows little or no panic among the investing public. At the same time, investors have been trying to gauge the timing of an expected winding down of the Fed's bond-buying stimulus, with many market participants expecting the Fed to announce a tapering in March.

Stronger economic data of late, however, has led some to shorten that timeline to as soon as the end of next week's two-day meeting. Economic data on Friday indicated that producer prices declined in November for a third straight month, due in no small part to a lack of inflation pressure. That in and of itself could provide the Fed with some wiggle room as it weighs the future of its stimulus program.

T-Mobile rose late in regular trading day after a Wall Street Journal report that Sprint is considering a bid for the company. T-Mobile ended the day up 8.7 percent to close at $27.64 while Sprint gained 3.4 percent to end at $8.43. After the bell, Sprint further extended its gain by 3.1 percent.

Shares of International Paper were up 3.6 percent on the day to close at $47.83 and led the gainers in the S&P 500's materials sector. In the energy sector, shares of Anadarko Petroleum fell 6.4 percent to $78.31 a day after a judge ruled that Anadarko and its Kerr-McGee unit acted with "intent to hinder" when they spun off Tronox, a paint materials company that later went bankrupt. The judge ruled that Anadarko and Kerr-McGee should pay billions of dollars in environmental cleanup costs. Tronox shares ended the day up 7.5 percent, closing at $22.76.

Adobe Systems rose 12.8 percent to close at $60.89, a day after the company reported a substantial increase in the number of subscribers to its Creative Cloud suite from the previous quarter.

Twitter rose 6.6 percent to a record closing high of $59, a day after the company was forced to nix a change to its "block" feature after users protested that the new policy empowered perpetrators of online abuse.

Approximately 5.5 billion shares changed hands on the major equity exchanges, a number that was below the average of 6.1 billion shares traded so far this month, according to data from BATS Global Markets.

Producer Price Index Falls

The Labor Department reported on Friday that its producer price index fell for a third straight month in November, pointing to a lack of inflation pressure. According to the Department, its seasonally adjusted producer price index fell 0.1 percent as gasoline prices maintained their downward trend. Prices received by the nation's farms, factories and refineries fell 0.2 percent in October. It was the first time since October of last year that producer prices had fallen for three consecutive months and analysts had expected prices would be flat in November.

During the 12 months through November, producer prices gained 0.7 percent after rising 0.3 percent in October. Wholesale prices stripping out volatile food and energy costs nudged up just 0.1 percent last month after rising 0.2 percent in October. The 12-month gain slipped to 1.3 percent from 1.4 percent in October.

Moreover, despite signs of the economy gaining strength, there is little to indicate price pressures will pick up soon, given the still-considerable slack in the labor market.

Some Fed officials have raised concerns about inflation being too low, as they mull the future of their $85 billion a month bond-buying program. A core inflation gauge closely followed by the central bank was up just 1.1 percent in October.

Consumer inflation data next week is expected to show prices barely rising in November, and domestic inflation is expected to remain subdued through next year, even as growth accelerates.

Last month, wholesale gasoline prices fell 0.7 percent, accounting for nearly three-quarters of the decrease in the energy index and building on a 3.8 percent decline in October. Wholesale food prices were flat, with higher prices for pork offset by a record fall in bakery goods and the biggest drop in the prices for young chickens in nearly three years. Passenger car prices fell 0.8 percent after increasing 1.7 percent in October as new vehicle models were introduced. Light truck prices increased 0.6 percent.