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Investor apprehensions about the Fiscal Cliff once again dented the benchmarks on Friday. The S&P 500 and the Dow Jones posted their first weekly declines in a month. Meanwhile, industrial production surged in November, whereas consumer price index declined in November. Separately, China’s manufacturing sector hit a 14-month high in December. The technology sector was the biggest loser, while the materials sector was the only gainer among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) lost 0.3% to close the day at 13,135.01. The Standard & Poor 500 (S&P 500) dropped 0.4% to finish Friday’s trading session at 1,413.58. The tech-laden Nasdaq Composite Index slipped 0.7% to end at 2,971.33. The fear-gauge CBOE Volatility Index (VIX) added 2.7% to settle at 17.00. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.8 billion shares, significantly lower than the daily average of 6.52 billion shares. Declining stocks outpaced advancers on the NYSE; as for 51% stocks that fell, 45% stocks moved higher.
Benchmarks closed in the red on Friday and also registered their first weekly fall in a month. Investor concerns about a timely solution of the Fiscal Cliff dilemma overshadowed encouraging domestic and international economic reports in the previous week. For the week, the blue-chip index fell 0.2%, the S&P 500 declined 0.3% and the Nasdaq slipped 0.2%.
President Barack Obama and House of Representatives Speaker John Boehner met on Thursday to discuss the Fiscal Cliff issue. Treasury Secretary Timothy Geithner was also present at the meeting. President Obama said: “I'm willing to do a lot more cuts in spending. We also need to pair it up with a little more revenue.” The Fiscal Cliff of $600 billion in spending cuts and tax increase will take effect from the beginning of 2013 if Congress fails to reach a deal.
Meanwhile, industrial production rebounded from the previous month’s fall and surged 1.1% in November. This was well above consensus estimates of an increase of 0.1%. According to the Board of Governors of the Federal Reserve System, November’s gain was mostly boosted by a recovery in production for those industries which were badly affected by Hurricane Sandy. Manufacturing activity increased 1.1% in November following a 1.0% decline in October. Utilities posted a gain of 1.0%, whereas productions at mines surged 0.8%.
The U.S. Bureau of Labor Statistics reported that the seasonally adjusted Consumer Price Index for All Urban Consumers decreased 0.3% in November, wider than consensus estimates of a decline of 0.2%. The consumer price index posted its first decline in six months. The energy index tumbled 4.1% in November while the food index gained 0.2% in November.
On the international front, the Street received encouraging economic data from China. According to HSBC, China’s preliminary Purchasing Manger Index increased to 50.9 in December. The world’s second largest economy’s manufacturing activity grew at its fastest pace in 14 months. However, because of the greater focus on the Fiscal Cliff issue, investors chose to ignore this promising report.
The technology sector had a bad run and the Technology SPDR (XLK) lost 0.9%. Stocks such as Apple Inc. (NASDAQ:AAPL), Dell Inc. (NASDAQ:DELL), SanDisk Corporation (NASDAQ:SNDK), Digi International Inc. (NASDAQ:DGII) and Microsoft Corporation (NASDAQ:MSFT) tumbled 3.8%, 1.0%, 1.2%, 0.7% and 1.1%, respectively.
The materials sector was the only gainer among the S&P 500 industry groups. The Materials Select Sector SPDR (XLB) gained 0.7%. Stocks such as PPG Industries, Inc. (NYSE:PPG), RPM International Inc. (NYSE:RPM), The Valspar Corporation (NYSE:VAL), Sherwin-Williams Company (NYSE:SHW) and The Dow Chemical Company (NYSE:DOW) jumped 3.8%, 1.4%, 1.3%, 0.7% and 1.3%, respectively.