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A slump in U.S retail stocks and investor apprehensions about the Fiscal Cliff dragged the benchmarks lower on Wednesday. This was the third consecutive day of losses for the benchmarks and a report which showed that U.S. single-family home prices had increased in October was of no help. While the S&P 500 suffered its biggest three-day fall since mid-last month, only the materials sector out of its 10 industry groups could finish in the green yesterday.

The Dow Jones Industrial Average (DJI) lost 0.2% to close the day at 13,114.59. The Standard & Poor 500 (S&P 500) shed 0.5% to finish yesterday’s trading session at 1,419.83. The tech-laden Nasdaq Composite Index slipped 0.7% to end at 2,990.16. The fear-gauge CBOE Volatility Index (VIX) jumped 9.2% to settle at 19.48. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 4.01 billion shares, considerably lower than the daily average of 6.48 billion shares. Declining stocks easily outpaced advancers on the NYSE; as for 62% stocks that fell, only 34% stocks moved higher.

With hardly any major development regarding the Fiscal Cliff dilemma in the past three trading sessions, benchmarks have consistently closed in the red during this period. The S&P 500 logged its largest three-day decline since November 15, declining 1.5% in the last three trading sessions.

President Barack Obama and Congress will be back on Thursday from their short Christmas holiday to negotiate the Fiscal Cliff issue for the final time. Both President Obama and House of Representatives Speaker John Boehner have tried to resolve the Fiscal Cliff issue but they did not succeed in their efforts. If Congress fails to avert the Fiscal Cliff of $600 billion in spending cuts and tax increases, then it will take effect from next week and may result in another recession.    

Also weighing on the mood yesterday was dismal data about holiday season sales. U.S retailers had expected to post encouraging sales, but it did not happen this time around. A report from MasterCard Advisors SpendingPulse showed that U.S retailers witnessed a mere 0.7% increase in sales from October 28 to December 24 compared with the same period in the previous year. U.S consumer spending accounts for nearly 70% of the economy and low retail sales in the otherwise promising holiday season is definitely a matter of concern.

The Consumer Discretionary Select Sector SPDR (XLY) lost 1.0% and was the biggest loser among the S&P 500 industry groups. Stocks such as Abercrombie & Fitch Co. (NYSE:ANF), The Gap Inc. (NYSE:GPS), Amazon.com, Inc. (NASDAQ:AMZN), Limited Brands, Inc. (NYSE:LTD) and Ralph Lauren Corp (NYSE:RL) plunged 3.5%, 3.1%, 3.9%, 3.2% and 3.3%, respectively.

However, the housing sector had positive numbers to share. The S&P/Case-Shiller Home Price Indices revealed that both its 10- and 20 city composites increased in October on a seasonally adjusted basis. According to the report, the S&P/Case-Shiller composite index of 10 and 20 city composites surged 0.6% and 0.7%, respectively, in October from September on a seasonally adjusted basis. However, the S&P/Case-Shiller composite index of 10 and 20 city composites both declined 0.1% in October from September on a non-seasonally adjusted basis. The report also states that the S&P/Case-Shiller 20-city composite Home Price Index has increased 4.3% year on year.

The materials sector was the only sector which ended in the green among the S&P 500 industry groups for two consecutive days. The Materials Select Sector SPDR (XLB) gained 0.6%. Stocks such as The Dow Chemical Company (NYSE:DOW), E I Du Pont De Nemours And Co (NYSE:DD), Monsanto Company (NYSE:MON), American Vanguard Corp. (NYSE:AVD) and LyondellBasell Industries NV (NYSE:LYB) added 0.6%, 1.4%, 2.5%, 0.3% and 0.6%, respectively.

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