Boehner’s “Plan B” failed to garner ample support from Republicans, dragging the benchmarks into negative territory on Friday. However, the benchmarks finished higher for the week. Both personal spending and demand for durable goods showed an upward trend in November. The financial and energy sectors were the major losers among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) lost 0.5% to close the day at 13,190.84. The Standard & Poor 500 (S&P 500) shed 0.9% to finish Friday’s trading session at 1,430.15. The tech-laden Nasdaq Composite Index dropped 1.0% to end at 3,021.01. The fear-gauge CBOE Volatility Index (VIX) climbed 1.0% to settle at 17.84. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 8.59 billion shares, significantly higher than the daily average of 6.47 billion shares. Declining stocks easily outpaced advancers on the NYSE; as for 64% stocks that fell, only 34% stocks moved higher.
The movement of benchmarks is closely linked to developments regarding ongoing negotiations on the Fiscal Cliff dilemma. A negative development on this front, therefore, dragged benchmarks into the red. Markets opened in the red on Friday and the blue-chip index lost as much as 189 points before ending the session lower by 120 points. However, benchmarks ended the week on a winning note and the Dow gained 0.4%, S&P 500 surged 1.2% and the Nasdaq jumped 1.7%. The weekly jump came on the back of optimism that Congress will seal a deal on the Fiscal Cliff issue before January 1.
The important news for the day was that House of Representatives Speaker John Boehner had failed to gather support from his own party to pass “Plan B”. Boehner’s “Plan B” states that people earning above $1 million will have to pay higher tax rates. Boehner was disappointed after the failure of “Plan B” and said if President Barack Obama and Congress fail to take necessary steps to avoid the Fiscal Cliff, then it will take effect in a few days. Boehner said: “How we get there, God only knows.”
President Barack Obama said 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.”
Meanwhile, the Bureau of Economic Analysis revealed that personal spending increased 0.4% in November, in line with consensus estimates. In October personal spending had decreased 0.1%. The report also states that personal income and disposable income both surged 0.6% in November.
Separately, the U.S. Department of Commerce reported that orders for manufactured durable goods gained 0.7% to touch $220.9 billion in November. This was above the consensus estimates of an increase of 0.3% in November. Moreover, excluding transportation and defense, new orders gained 1.6% and 0.8%, respectively. New orders have now increased for six out of the last seven months.
The Financial Select Sector SPDR (XLF) lost 1.2% and was the major loser among the S&P 500 industry groups. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), Goldman Sachs Group, Inc. (NYSE:GS), PNC Financial Services (NYSE:PNC) and Citigroup Inc. (NYSE:C) slipped 1.2%, 1.7%, 1.0%, 1.5% and 1.7%, respectively.
The Energy Select Sector SPDR (XLE) also lost 1.2%. 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 1.9%, 0.6%, 1.3%, 3.0% and 0.7%, respectively.