Markets ended in the red after Senate Majority Leader Harry Reid’s discouraging comments about the “fiscal cliff” overshadowed a number of positive economic reports. Additionally, Greece’s lenders concurred on providing additional aid to the nation. Among the positive economic readings, consumer confidence jumped to its highest level in more than four years. The Utilities sector was the only gainer among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) declined 0.7% to close the day at 12,878.13. The Standard & Poor 500 (S&P 500) dropped 0.5% to finish yesterday’s trading session at 1,398.94. The tech-laden Nasdaq Composite Index shed 0.3% to end at 2,967.79. The fear-gauge CBOE Volatility Index (VIX) surged 2.7% to settle at 15.92. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.9 billion shares, significantly lower than the daily average of 6.5 billion shares. Declining stocks outpaced advancers on the NYSE; as for 54% stocks that declined, 43% stocks moved higher.
Benchmarks began yesterday’s trading session with a number of positive news from both international and domestic fronts. Markets traded almost flat through the day, but Harry Reid’s dismal comments on the fiscal cliff issue dragged benchmarks into the red. This was the second consecutive day of losses after U.S stocks enjoyed one of their best weekly gains last week.
Senate Majority Leader Harry Reid was unhappy about the lack of progress regarding the fiscal cliff issue. He said that “little progress” has been made to avoid the impending fiscal cliff. He also said there were only a couple of weeks left to reach an agreement and it was time to start discussing specifics. The fiscal cliff of $600 billion in tax increases and government spending cuts is slated to take effect from the beginning of 2013 if Congress fails to reach a deal.
Meanwhile, the White House said President Barack Obama is scheduled to meet business leaders of bellwether companies including Goldman Sachs Group, Inc. (NYSE:GS) and Caterpillar Inc. (NYSE:CAT) on Wednesday to discuss the impending fiscal cliff issue. According to a New York Times report, Obama will also meet select small business owners and middle class tax payers in the coming days.
On the international front, Greece’s international lenders met in Brussels on Monday to discuss its debt situation. It was their third meeting on the same issue and they have now finally reached an agreement. According to Eurogroup Chairman Jean-Claude Juncker, Greece will get its next loan installment on December 13. They have also agreed to reduce Greece’s debt by more than 40 billion euros and estimate debt will fall to 124% of the gross domestic product by 2020. After the meeting, Greece Prime minister Antonis Samaras said: “Tomorrow a new day begins for all Greeks”.
Meanwhile, consumer confidence surged in November and touched its highest level in more than four years. Consumer confidence increased to 73.7 in November from October’s reading of 73.1. This was above consensus estimates of 72.0. The Present Situation Index increased to 56.7 from 56.6, whereas the Expectation Index jumped to 85.1 in November from the previous month’s figure of 84.0.
Separately, the S&P Dow Jones Indices released the S&P/Case-Shiller Home Price Indices, which noted a 0.3% increase in average home prices for both the 10- and 20-City Composites in September from the previous month. According to the report, the national composite rose 3.6% in the third-quarter as against the previous year third-quarter. Thirteen out of the twenty cities posted monthly gains.
The U.S. Department of Commerce reported a marginal increase in durable goods orders in October. According to the report, new orders increased to 216,948 from September’s figure of 216,900. This was in sharp contrast to consensus estimates of a fall of 0.7%. Excluding defense and transportation, new orders increased 0.1% and 1.5%, respectively. News orders have increased for five months out of the last six months.
As for the sectors, Utilities finished in the green for the second consecutive day and the Utilities SPDR (XLU) gained 0.3%. Stocks such as Exelon Corporation (NYSE:EXC), Public Service Enterprise Group Inc. (NYSE:PEG), FirstEnergy Corp. (NYSE:FE), NRG Energy Inc (NYSE:NRG) and Genon Energy Inc (NYSE:GEN) surged 1.5%, 0.2%, 0.5%, 2.3% and 2.5%, respectively.
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