Wall Street keeps steady eye on fiscal cliff developments

14th Dec 2012, 11:25 am by Deborah Bacal
President Barack Obama and House Speaker John Boehner had another meeting yesterday on budget negotiations, with both offices reporting lines of communication remained open. President Barack Obama and House Speaker John Boehner had another meeting yesterday on budget negotiations, with both offices reporting lines of communication remained open.

U.S. stocks were slightly down Friday morning as investors were waiting for a deal to be reached to avert the automatic tax hikes and spending cuts due to take effect in January. 

The Dow was lately off a slight 3 points to 13,168, the Nasdaq was down 15 points to 2,977, and the S&P was lower by 3 points to 1,416. 

President Barack Obama and House Speaker John Boehner had another meeting yesterday on budget negotiations, with both offices reporting lines of communication remained open. 

Investors are anxious about Congress coming to an agreement to avert the so called fiscal cliff. U.S. House Speaker John Boehner said Wednesday that President Barack Obama’s plan can’t pass the House or Senate and there are some "serious differences” on the fiscal cliff.

It is feared that failure to come to an agreement would trigger a recession.

Markets largely ignored economic data on Friday in favour of keeping an eye on developments relating to budget negotiations. 

The Labour Department reported today that the cost of living fell last month by 0.3%, slightly higher than the expected 0.2% decline forecast by economists.  This followed a 0.1% increase the month before. 

Excluding food and energy, the CPI rose 0.1%, following a boost of 0.2% in October. The median market forecast was for a 0.2% rise.

Earlier this week, the Federal Reserve replaced the Operation Twist program that was due to expire at the end of the year, with a fresh round of Treasury purchases that will boost its balance sheet in an ongoing effort to reduce the jobless rate and bolster economic growth.

The Fed also established numerical thresholds for policy, and said it would likely keep rates near zero for as long as the unemployment rate remains above 6.5% and inflation is not forecast to rise above 2.5%. 

Another economic report today said U.S. industrial production rose 1.1% in November as manufacturing picked up after Hurricane Sandy.

Meanwhile, the first half of December has so far been good for the nation's manufacturers based on the PMI flash index, which rose to 54.2, up a solid 1.4 points from the final index for November. A reading over 50 indicates monthly growth in business activity.

In China, data showed stronger-than-expected growth in the manufacturing sector this month. The December preliminary reading of 50.9 for the HSBC purchasing managers' index topped the 50.8 expectation and was an improvement from the 50.5 reading in the preceding month. 

In corporate news today, Adobe Systems (NASDAQ:ADBE) saw its shares rise early Friday, after it posted fiscal fourth-quarter earnings that came in ahead of analyst expectations after the bell yesterday. Shares in the software company rose over 5.6%. 

Schlumberger (NYSE:SLB) warned Friday that that its fourth quarter earnings would take a hit due to continued contractual delays in some regions and weaker than expected activity in North America - news that is expected to weigh down the oil services sector today. 

Shares in the oil services company were lately down more than 5.7%. 

Healthcare insurer Centene Corp. (NYSE:CNC) also saw its shares fall over nine per cent Friday, after it slashed its full-year earnings guidance for 2012, citing higher medical costs.

In M&A news, cable TV company Discovery Communications (NASDAQ:DISCA) Friday said it was buying 12 TV networks in Norway, Sweden, Denmark and Finland in a deal worth around $1.7 billion.

Dutch paints and chemicals group Akzo Nobel Friday said it has sold its Decorative Paints business to rival PPG Industries (NYSE:PPG) for $1.05 billion. The sale is the latest move by the world's biggest paints maker to address problems it inherited through its $13 billion acquisition of the U.K.'s Imperial Chemical Industries in 2008.

Last year, AkzoNobel's North American decorative paints unit had revenue of $1.5 billion, about 7 per cent of the group total.

In the biotech sector, Isis Pharmaceuticals (NASDAQ:ISIS) and partner Genzyme, Friday said that the European Medicines Agency (EMA) turned down a marketing authorization application for their blood pressure drug, citing safety concerns.

Elsewhere on the Nasdaq, Apple (NASDAQ:AAPL) was also in focus as the company is debuting its iPhone 5 in China today, a move that is expected to help reverse the slide in its market share in that country. Shares in the iPhone and iPad maker were lately down by more than 3.9%. 

Commodities 

January crude advanced on the better-than-expected China data, rising 75 cents to $86.65 per barrel, while gold for February delivery rose $1 to $1,698 an ounce. 

Europe

European markets were lately mixed. The DAX was higher by 0.16%, while the CAC 40 led the FTSE 100 lower. They were down 0.05% and 0.03%, respectively.

No investment advice


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