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Encouraging economic data outweighed concerns regarding the “fiscal cliff” and lifted the markets into the green on Friday. Among the positive economic readings, consumer sentiment jumped to its highest level in more than five years and wholesale inventories data showed strength. However, Friday’s gains were not strong enough to prevent the S&P 500 from registered its worst week since the beginning of June.
The Dow Jones Industrial Average (DJI) rose 0.03% to close the day at 12,815.24. The Standard & Poor 500 (S&P 500) was up by 0.2% to finish yesterday’s trading session at 1,379.85. The tech-laden Nasdaq Composite Index gained 0.3% to end at 2,904.87. The fear-gauge CBOE Volatility Index (VIX) rose 0.7% to settle at 18.61. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.6 billion shares, slightly higher than the daily average of 6.52 billion shares. Declining stocks beat the advancers on the NYSE; as for 50% stocks that fell, 47% stocks moved higher.
Benchmarks finished in the green following two consecutive days of losses. However, Friday’s modest gains failed to save the benchmarks from suffering weekly losses. For the week, the Dow fell 2.1%, the S&P 500 shed 2.4% and the Nasdaq lost 2.6%. At the beginning of the week investors were worried about the outcome of the Presidential election but after Barack Obama’s re-election investors have shifted their focus to the impending fiscal cliff debate.
Meanwhile, Thomson Reuters/University of Michigan reported in a preliminary reading that the consumer sentiment index has jumped to its highest level since July 2007 in November. According to the report, consumer sentiment increased to 84.9 in November from 82.6 in October. This was above the consensus estimate of 82.1.
President Obama has asked top Democratic and Republican leaders this week to commence discussion on the impending fiscal cliff. Speaking on the issue following his re-election, President Obama said: “I'm not wedded to every detail of my plan. I'm open to compromise, I'm open to new ideas, I'm committed to solving our fiscal challenges, but I refuse to accept any approach that isn't balanced.” Once again, he emphasized that rich Americans will have to pay more tax
U.S. markets were badly hit for the week ending November 9, as investors remained concerned whether the fiscal cliff of $600 billion in spending and tax increases would be resolved in time. According to experts and the Congress Budget Office, this need to be successfully negotiated; otherwise it could result in another recession.
Separately, the U.S. Census Bureau reported that total inventories of merchant wholesalers rose by 1.1% from August to $494.2 billion in September. Inventories for durable goods increased 0.9% in September, whereas inventories of metals and minerals, excluding petroleum, increased 1.9% from August. Inventories of nondurable goods rose by 1.4% in September.
On the international front, investor apprehension continued over the Euro zone debt crisis. According to the German economy ministry, growth in Germany will decrease in the coming two quarters as companies delay investment. Meanwhile, France’s central bank warned that recession may hit France by the end of 2012.
Coming to the sectors, the Technology SPDR (XLK) surged 0.5%. Stocks such as Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), SanDisk Corporation (NASDAQ:SNDK), Digi International Inc. (NASDAQ:DGII) and Microsoft Corporation (NASDAQ:MSFT) rose 1.7%, 1.7%, 0.3%, 0.9% and 0.1%, respectively.
The Utilities SPDR (XLU) lost 0.6% and was the major loser among S&P 500 industry groups. Stocks such as Exelon Corporation (NYSE:EXC), The Southern Company (NYSE:SO), NextEra Energy, Inc. (NYSE:NEE), TECO Energy, Inc. (NYSE:TE) and Duke Energy Corp (NYSE:DUK) lost 1.8%, 0.5%, 0.3%, 0.8% and 1.0%, respectively.