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Stock Market News for December 5, 2012

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Markets ended lower for the second consecutive day as Republicans and Democrats continued to debate the Fiscal Cliff issue. Meanwhile, President Barack Obama once gain emphasized on increasing the tax rates for rich Americans. Industrial sector was the biggest gainer, whereas utilities lost the most among the S&P 500 industry groups.   

The Dow Jones Industrial Average (DJI) lost 0.1% to close the day at 12,951.78. The Standard & Poor 500 (S&P 500) dropped 0.2% to finish yesterday’s trading session at 1,407.05. The tech-laden Nasdaq Composite Index shed 0.2% to end at 2,996.69. The fear-gauge CBOE Volatility Index (VIX) gained 2.9% to settle at 17.12. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.86 billion shares, significantly lower than the daily average of 6.48 billion shares. Declining stocks beat advancers on the NYSE; as for 49% stocks that declined, 47% stocks moved higher.

Benchmarks ended in negative territory for the second consecutive day. Lack of progress on the Fiscal Cliff issue gave investors no reason to place their bets yesterday. Stocks oscillated between small gains and losses on Tuesday. Over the past few days, markets have been moving on the basis of developments regarding ongoing negotiations about the Fiscal Cliff.

Republicans had proposed raising $800 billion in additional tax revenue. The plan also included reducing $600 billion from health care programs and cutting $300 billion from both other mandatory spending and discretionary spending. Last week, Republicans rejected Treasury Secretary Timothy Geithner’s proposal of raising tax revenues by $1.6 trillion over the next 10 years. If Congress fails to seal a deal on the issue, then it will take effect in less than four weeks and most likely cause another recession.

Yesterday President Obama rejected the Republican plan about the Fiscal Cliff. Last week, Republicans had rejected President Obama’s plan and proposed a new plan. Obama called the Republican plan as “out of balance” and insisted on increasing tax rates for rich Americans. Obama said: “We’re going to have to have higher rates for the wealthiest”. He also said that no deal will be reached until Republicans agree to increase tax rates for rich Americans.
President Barack Obama is scheduled to meet corporate chief executives on Wednesday to discuss the issue. Corporate chief executives are also looking for a decrease in tax rates for their companies. The CEO of Boeing Company (NYSE:BA) will head the group and he said that they want “a balanced solution to the nation's fiscal cliff and long-term deficit and debt issues ... including meaningful and comprehensive tax and entitlement reforms”.

Coming to the sectors, Industrial Select Sector SPDR (XLI) gained 0.4% and was the biggest gainer among the S&P 500 industry groups. Looking at XLI’s top ten holding companies, General Electric Company (NYSE:GE), United Technologies Corporation (NYSE:UTX), United Parcel Service, Inc. (NYSE:UPS), Deere & Company (NYSE:DE) and Emerson Electric Co. (NYSE:EMR) surged 0.2%, 0.4%, 1.1%, 0.3% and 0.3%, respectively.

The Utilities SPDR (XLU) was the biggest loser among the S&P 500 industry groups. Stocks such as Exelon Corporation (NYSE:EXC), Public Service Enterprise Group Inc. (NYSE:PEG), The Southern Company (NYSE:SO), Entergy Corporation (NYSE:ETR) and PPL Corporation (NYSE:PPL) lost 1.0%, 0.4%, 0.6%, 0.7% and 0.4%, respectively.

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