Benchmarks ended lower on Monday after two consecutive days of gains as investors remained apprehensive about the fiscal cliff. Investors also awaited the outcome of talks among Euro zone finance ministers, International Monetary Fund and European Central Bank about Greece’s debt crisis. Investors were also worried about the big discounts offered by U.S retailers during the holiday season. The utilities sector was the biggest gainer among S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) declined 0.3% to close the day at 12,967.37. The Standard & Poor 500 (S&P 500) dropped 0.2% to finish yesterday’s trading session at 1,406.29. The tech-laden Nasdaq Composite Index rose 0.3% to end at 2,976.78. The fear-gauge CBOE Volatility Index (VIX) surged 2.4% to settle at 15.5. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.2 billion shares, significantly lower than the daily average of 6.49 billion shares. Declining stocks outpaced advancers on the NYSE; as for 55% stocks that declined, 42% stocks moved higher.
Benchmarks began Monday’s trading session with a number of headwinds blocking their progress. The Dow had tumbled more than 100 points in the initial session. Except the Nasdaq, all of the benchmarks ended in the red. The loss came after markets registered one of their best weekly gains last week. President Barack Obama’s meeting with top U.S. leaders that hinted at “constructive” developments regarding the “fiscal cliff” had lifted the mood last week. Few positive domestic and international economic reports also pushed the benchmarks higher in the previous week.
Coming to Monday’s developments, investors were apprehensive ahead of this week’s meeting about the fiscal cliff dilemma. President Barack Obama will meet with business leaders on Wednesday to discuss the issue. According to experts, investors will keep their focus on the fiscal cliff discussion and will hope for advances in the negotiation process. Speaker of the House of Representatives John Boehner said: “People in both parties agree we need a ‘balanced approach’ to deal with our deficit and debt and help our economy create jobs”.
According to the White House, consumer spending may decline by $200 billion if an automatic federal tax increase, which is slated to take its effect from the beginning of 2013, is not resolved by Congress. This may affect the remaining holiday season also. According to a report released by the White House on Monday, if Congress fails to resolve the fiscal cliff, then an increase in tax rates for middle income Americans will reduce consumer spending by 1.7%. Additionally, economic growth will decline by 1.4% in 2013.
Separately, the National Retail Federation reported that U.S. retailers posted sales worth $59.1 billion during the four-day holiday weekend. Retail sales have increased by 12.8% from the previous year. According to experts, retail sales have increased but big retailers are offering heavy discounts, which is a matter of concern.
The Consumer Discretionary SPDR (XLY) fell 0.4% on Monday. Stocks such as Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST), Wal-Mart Stores, Inc. (NYSE:WMT), Macy’s, Inc. (NYSE:M) and Saks Inc (NYSE:SKS) plunged 2.6%, 1.7%, 0.4%, 4.5% and 2.8%, respectively.
On the international front, Euro zone finance ministers, International Monetary Fund and the European Central Bank were scheduled to meet in Brussels on Monday to discuss Greece’s debt crisis. Investors eagerly await the outcome of the meeting as the international lenders had failed to reach any conclusion in the previous two meetings.
The utilities sector was the major gainer and the Utilities SPDR (XLU) gained 1.3%. Stock such as Exelon Corporation (NYSE:EXC), Public Service Enterprise Group Inc. (NYSE:PEG), NextEra Energy, Inc. (NYSE:NEE), Dominion Resources, Inc. (NYSE:D) and FirstEnergy Corp. (NYSE:FE) surged 2.6%, 1.6%, 1.1%, 1.1% and 1.7%, respectively.
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