After The Close - Stocks fell again today, and sharply into the close, on lingering concerns the United States will soon head over the proverbial "fiscal cliff" of mandatory sharp government spending reductions and tax hikes. Congress and the White House have yet to agree on an alternative plan that would lessen the projected effect on the economy.

We note that, in some ways, the endless internal strife among the branches of government is what the nation’s founders had in mind when they set up the system of checks and balances between the Executive, Legislative, and Judicial branches. That way, one could not gain the upper hand on any of the others for very long.

However, Wall Street has other ideas. The investment community does not want to see anything that would potentially hamper the mild economic recovery that has taken hold since the last recession, and going over the fiscal cliff might well cause a short-term setback. As a result, stocks retreated for their fifth straight session.

At the end of the day, Dow Jones Industrial Average had dropped 158 points and the NASDAQ had given up 26 points. More than two stocks declined for every one advancing on the New York Stock Exchange.

All ten stock market sectors were in the red this session, with energy stocks leading the decline. Shares of a number of major oil-related companies, including those of Dow components Exxon Mobil (XOM - Free Exxon Stock Report) and Chevron (CVX - Free Chevron Stock Report), as well as Schlumberger (SLB) fell more than the typical stock.

The energy sector’s relative underperformance came despite oil prices that were mostly steady on the day and modestly higher for the week. But a government report showing a lower-than-expected draw on the nation’s crude oil supplies last week may have hurt sentiment.  

Investors also shrugged off some good news on the economy, as the ISM Chicago purchasing managers index came in above expectations and pending home sales for November rose to their highest level in nearly three years. Moreover, a potentially damaging dock strike at ports along the East Coast was averted when labor and management tentatively came to terms. 

Globally, stocks in Europe sold off, apparently in sympathy with U.S. market concerns over fiscal cliff issues. But the Asian financial markets headed higher on optimism that the Bank of Japan would soon implement more stimulus measures.

Next week brings the final trading day of the year on Monday, New Year’s Eve. On an otherwise light day for corporate and economic news, the near-term spotlight is sure to be on whether or not any progress is made toward avoiding the fiscal cliff. Negotiations will likely continue over the weekend. On Tuesday, the stock market will be closed for the New Year’s holiday. We sincerely wish all of our readers a happy and healthy new year.   - Robert Mitkowski

At the time of this writing, the author did not have positions in any of the stocks mentioned.  


12:30 PM EST - The U.S. stock market opened lower this morning, but is now well off its session lows. As we pass the noon hour in New York, the Dow Jones Industrial Average is still off about 68 points (-0.5%); the S&P 500 Index is down seven points (-0.5%); and the tech-heavy NASDAQ is lower by nine points (-0.3%). Market breadth suggests a mixed tone, as declining stocks are outnumbering advancers by a narrow margin on both the NYSE and the NASDAQ. Most of the market sectors are lower today, with weakness in the energy and basic materials names. There is some relative strength in the utility and transport groups.

Technically, the S&P 500 Index is moving lower again today, extending a slide that has lasted for several sessions. The Index has broken through its 50-day moving average, located at 1,413, and it remains to be seen if this level can offer some support. If we move lower from here, the Index may test its 200-day moving average located at 1,390. This would mark a further 1.5% pullback from the current level. Traders are turning a bit more skittish as the VIX is up 3%, to 20, today.

With the year drawing to a close, traders are still likely concerned that the nation’s budget problems will not be solved. That would cause further economic uncertainty, which is never a positive for traders. Elsewhere, the economic news was light today. The recent figures continue to suggest that the housing market is recovering. Pending home sales for November rose 1.7%, which was a bit better than many economists had expected. Elsewhere, the nation’s economic recovery seems to be holding up well in some regions. The Chicago PMI came in at 51.6 in December, which was better than the 51.0 figure that many had been anticipating. The recent reading was also higher than the 50.4 showing logged last month. Looking ahead, we kick off the New Year with a busy week. Traders will no doubt be watching the employment report for December, due out next Friday.

Finally, the corporate news has been minimal. Nonetheless, shares of struggling bookseller Barnes & Noble (BKS) are rising on reports that Financial Times-owner Pearson will be buying a 5% stake in the Nook business. Elsewhere, Cepheid (CPHD) is seeing it stock move higher on news that the FDA has approved one of the company’s diagnostic tests. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Stocks to Watch from The Survey Corporate news is light again today, as is typically the case between Christmas and New Year’s Day. However, entertainment technology company Synchronoss (SNCR) has agreed to pay $55.5 million for smartphone maker Research in Motion’s (RIMM) NewBay unit, which provides cloud-based services. Elsewhere, medical supplies company Cepheid (CPHD) has received permission from the Food and Drug Administration to market a new test for chlamydia and gonorrhea. Finally, shares of cellphone maker Nokia (NOK) are down modestly ahead of the bell, likely due to reports that some carriers are offering steep post-holiday discounts on the company’s Lumia phones. – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.


Before The Bell - In the 1959 Brook Benton ballad "It's Just A Matter Of Time'' there are the words "what goes up must come down''.  Yesterday on Wall Street, a sequel to that hit could well have been what goes down can sometimes go back up--for that is just what happened in the latest session. To wit, a near-150-point loss in the Dow Jones Industrial Average in the early afternoon was, at one point, totally overcome. In fact, for a brief time that 30-stock composite of mostly blue chip companies had actually moved in the black by some 25 points, before modest late selling pushed the index back in the loss column to the tune of 18 points. The Standard and Poor's 500 Index and the NASDAQ, which both traversed similar paths, fell by two and four points, respectively.

What drove this frenetic selling and subsequent buying were the latest dramatics on the budget front and the fast-approaching fiscal cliff of mandated tax increases and accompanying spending cuts that are set to kick in on January 2nd unless the White House and  Congress can strike a deal by that time. The latest selling, meantime, was notably set into motion by dour comments from Senate Majority Leader Harry Reid who intoned that it seemed to him as though a deal would not be forthcoming in time to avoid the cliff. The subsequent buying was occasioned, according to the pundits, by news that House Republicans would return to the bargaining table on Sunday. We'll see what develops from that return. At best, we see a partial deal emerging by January 2nd, or before, while the hoped-for so-called Grand Bargain may take decidedly longer to structure. For now, as a result, trading on Wall Street may remain more volatile than usual. In an indication of that likely step-up in market volatility, the latest session saw the CBOE Volatility Index, or the VIX, rise above 20 for the first time since July. It fell back some by the close, but the 19.47 reading is still well above the year's low of 13.30, but also decidedly below the 2012 high of 27.73.

Meanwhile, although it seems that the goings on in Washington are the only game in town for investors, there is still the economy, and a succession of data issuances that occasionally get a look by investors. Yesterday, for example, we saw a better report on new weekly jobless claims and a two-and-a-half-year high in sales of new homes, with an accompanying average home price increase. On the other hand, we also received a dour reading in consumer confidence. This latter item, while not a decisive influence on trading yesterday, still had its effect--and it was not good.  On the whole, though, such tidings are getting generally ignored on Wall Street these days, with the focus now squarely on the approaching cliff. Yet, we do warn, that the aforementioned drop in sentiment is an indication of what might be ahead should a budget deal not be brokered by next week.

Now, we look ahead to a new day on Wall Street, and the futures are not looking very promising for those long equities, as the Standard and Poor's 500 Index is again pressing lower, this time to the tune of seven points with less than an hour to go before the start of the new trading day. The NASDAQ futures are off by more than 11 points. Finally, there is still the economy, and later on this morning, the Chicago area purchasing managers will issue their survey on manufacturing activity in and around the Windy City. And, a few minutes later, the National Association of Realtors will release its data on pending home sales.

But for now, it is all about the progress or lack thereof in Washington. We caution that with many traders on vacation this week and news sparse beyond the Beltway, volatility, as noted, could be quite elevated, so fasten your seatbelts, for the ride could get bumpy. – Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.