Apprehension about this week’s “fiscal cliff” discussion between top U.S. leaders and President Barack Obama led to benchmarks ending flat. Trading volumes were light owing to the Veteran’s day holiday. Meanwhile, China’s export growth jumped to a five-month high. The healthcare sector was the major gainer, while utilities remained the biggest loser among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) ended flat, dropping merely 0.31 point to close the day at 12,815.08. The Standard & Poor 500 (S&P 500) was up 0.01% and finished yesterday’s trading session at 1,380.00. The tech-laden Nasdaq Composite Index slipped 0.02% to end at 2,904.25. The fear-gauge CBOE Volatility Index (VIX) dropped 1.9% to settle at 16.68. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 4.62 billion shares, significantly lower than the daily average of 6.52 billion shares. Declining stocks outpaced the advancers on the NYSE; as for 51% stocks that fell, 45% stocks moved higher.
Benchmarks had ended sharply lower in the previous week and they failed to recover from those losses on the first trading session of this week. Last week, investors’ sentiment was largely affected by the fiscal cliff dilemma and concerns over the Euro zone debt crisis. Trading volumes were low yesterday as the U.S. bond market was closed and many traders were absent from proceedings due to the holiday. Meanwhile, problems with the NYSE Euronext meant that trading activities in more than 200 stocks had to be postponed.
Investors now expectantly await Friday’s meeting between top Republican and Democratic leaders, who will be discussing ways and means to avoid the impending fiscal cliff. President Barack Obama is scheduled to hold a discussion with labor and civic leaders on Tuesday and with business executives on Wednesday. According to a Whitehouse official, the leaders will discuss “the best ways to move our economy forward and find a balanced approach to reduce the deficit”. Earlier, Barack Obama had 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”.
According to experts and the Congress Budget Office, the fiscal cliff of $600 billion in tax increases and the government spending needs to be successfully negotiated; otherwise it could result in another recession. If Congress doesn’t take necessary steps about the impending fiscal cliff, then the resultant tax increases and the decrease in government spending will take effect from the beginning of next year. This will decrease the trade deficit, but will dent the pace of growth of the U.S. economy.
On the international front, China, the world’s second largest economy, witnessed 11.6% increase in exports in October from the previous month’s 9.9% jump. The rate of imports remained flat month on month at 2.4% in October. Meanwhile, Chen Deming, Chinese Minister of Commerce, said: “The trade situation will be relatively grim in the next few months and there will be many difficulties next year”. He also said that due to weak global demand and increasing operating costs, Chinese exporters will face difficult conditions in the coming days.
The healthcare sector was the major gainer among S&P 500 industry groups and the Health Care SPDR (XLV) surged 0.5%. Stocks such as Abbott Laboratories (NYSE:ABT), Sanofi SA (NYSE:SNY), Watson Pharmaceuticals, Inc. (NYSE:WPI), Mylan Inc. (NASDAQ:MYL) and Endo Health Solutions Inc (NASDAQ:ENDP) rose 0.1%, 0.3%, 0.2%, 0.6% and 3.0%, respectively.
The Utilities SPDR (XLU) lost 0.8% and remained the major loser among S&P 500 industry groups. Stocks such as Exelon Corporation (NYSE:EXC), NextEra Energy, Inc. (NYSE:NEE), Genon Energy Inc (NYSE:GEN), Duke Energy Corp (NYSE:DUK) and Xcel Energy Inc (NYSE:XEL) tumbled 1.1%, 0.9%, 1.8%, 0.8% and 1.5%, respectively.