Investor apprehension about the Fiscal Cliff dilemma overshadowed couple of positive domestic reports and dragged the benchmarks into negative territory. Consequently, the S&P 500 ended its six day advance. The number of Americans filing for unemployment benefits dropped to its lowest level since February 2008. Separately, Euro zone finance ministers agreed to release the next installment of Greece’s bailout loan. The energy sector was the biggest loser among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) lost 0.6% to close the day at 13,170.72. The Standard & Poor 500 (S&P 500) dropped 0.6% to finish yesterday’s trading session at 1,419.45. The tech-laden Nasdaq Composite Index slipped 0.7% to end at 2,992.16. The fear-gauge CBOE Volatility Index (VIX) gained 3.8% to settle at 16.56. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.11 billion shares, lower than the daily average of 6.52 billion shares. Declining stocks easily outpaced advancers on the NYSE; as for 67% stocks that fell, only 29% stocks moved higher.
House of Representatives Speaker John Boehner said President Barack Obama is not serious about reducing spending. Barack Obama said discussions about the Fiscal Cliff dilemma are “still a work in progress.” Barack Obama and John Boehner were scheduled to meet on Thursday evening at the White House in their first face-to-face discussion on the Fiscal Cliff issue. If Congress fails to strike a deal to avert the Fiscal Cliff, then it will come into effect from the beginning of 2013.
Coming to the economic readings, the U.S. Department of Labor reported that the advance figure for seasonally adjusted initial claims declined 29,000 to 343,000 for the week ending December 8 from the prior week’s revised figure of 372,000. This was way below the consensus estimate of 373,000. Initial claims dropped to its lowest level since February 2008. However, this did not impact markets yesterday as investors were more focused on the developments surrounding the Fiscal Cliff issue.
Separately, the U.S. Census Bureau revealed that retail sales increased in November. According to the report, the advance monthly sales for retail and food services increased 0.3% to $412.4 billion in November from the previous month. This was below consensus estimates of an increase of 0.4%. Retail trades increased 0.2% in November from the previous month and 3.4% from the comparable period last year.
Meanwhile, the U.S. Bureau of Labor Statistics said the Producer Price Index for seasonally adjusted finished goods declined 0.8% in November, wider than consensus estimates of a decline of 0.5%. The producer price index has declined for two consecutive months.
On the international front, Euro zone finance ministers met in Brussels to hold discussions about the next installment of Greece’s bailout loan. After the meeting, Euro group head Jean-Claude Juncker said the next installment for Greece bailout loan “will be flowing to Greece as early as next week.” Greece will receive $46.7 billion in few days and $19.3 billion by March 2013. Greek Prime Minister Antonis Samaras was happy with the Euro group finance ministers’ decisions and said “Greece is back on its feet. The sacrifices of the Greek people have not been in vain.”
The energy sector was the biggest loser among the S&P 500 industry groups and the Energy Select Sector SPDR (XLE) lost 0.9%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Marathon Oil Corporation (NYSE:MRO), Royal Dutch Shell plc (NYSE:RDS.A) and Transocean LTD (NYSE:RIG) dropped 1.0%, 0.2%, 1.1%, 0.3% and 2.1%, respectively.
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