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Monday’s holiday-shortened trading session ended with losses for the benchmarks as investors remained apprehensive about lawmakers finding a solution to the “Fiscal Cliff”. This was the second consecutive day of losses for the markets after Boehner’s “Plan B” failed to garner ample support from his own party on Thursday evening. The materials sector was the biggest gainer while the energy sector was a major loser among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) lost 0.4% to close the day at 13,139.08. The Standard & Poor 500 (S&P 500) shed 0.2% to finish Monday’s trading session at 1,426.66. The tech-laden Nasdaq Composite Index slipped 0.2% to end at 3,012.60. The fear-gauge CBOE Volatility Index (VIX) climbed 4.2% to settle at 17.84. Roughly 1.24 billion shares were traded on the New York Stock Exchange. Declining stocks easily outpaced advancers on the NYSE; as for 58% stocks that fell, only 38% stocks moved higher.
U.S. stocks closed their trading session at 1P.M. on Monday and the Street was closed on Tuesday owing to the Christmas holiday. Thus, trading volumes were also light. Investors remain unsure whether the impending tax hikes and spending cuts can be avoided. Their apprehension was further intensified after House of Representatives Speaker John Boehner failed to gather ample support to pass his “Plan B”. The blue-chip index posted its biggest drop on Friday in more than a month after the failure of Boehner’s “Plan B.”
As for now, no major developments are expected to take place before Thursday as President Barack Obama is away on a short holiday break to Hawaii. President Barack Obama had said last week that he is still hopeful that a deal will be sealed before January 1 and will continue to work on a plan which will reduce deficit in the long run. Obama said: “Even though Democrats and Republicans are arguing about whether those rates should go up for the wealthiest individuals, all of us — every single one of us — agrees that tax rates shouldn't go up for the other 98 percent of Americans.”
In the recent days we have seen that the Fiscal Cliff issue is guiding the markets since investors are reacting in sync with developments regarding this issue. Last week, the Bureau of Economic Analysis had reported that personal spending increased in November and the U.S. Department of Commerce reported that orders for manufactured durable goods gained in November. Investors chose to ignore these reports and focused on the Fiscal Cliff.
However, the benchmarks are almost certain to have a winning finish for the year. The Dow, S&P 500 and Nasdaq have so far gained 7.5%, 13.4% and 15.6%, respectively, in 2012. The most important factors that pushed the benchmarks higher in 2012 are the recovery in the U.S. housing sector and a relatively better employment conditions. The Federal Reserve’s announcement of QE3 in September has also helped benchmarks to move higher.
The Materials Select Sector SPDR (XLB) gained 0.5% and was the biggest gainer among the S&P 500 industry groups. Stocks such as The Dow Chemical Company (NYSE:DOW), PPG Industries, Inc. (NYSE:PPG), Eastman Chemical Company (NYSE:EMN), FMC Corporation (NYSE:FMC) and Monsanto Company (NYSE:MON) added 0.6%, 1.5%, 1.1%, 1.0% and 0.3%, respectively.
The Energy Select Sector had a bad run and the Energy Select Sector SPDR (XLE) lost 0.6%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Marathon Oil Corporation (NYSE:MRO), Petroleo Brasileiro Petrobras SA (NYSE:PBR) and Suncor Energy Inc. (NYSE:SU) shed 0.4%, 1.0%, 1.2%, 0.9% and 0.6%, respectively.
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