Broadgate: Market News 11/12
11 December 2012
Stocks edged higher on Monday as technology shares bounced back after recent weakness and McDonald’s posted strong monthly sales.
Technology stocks were led by Hewlett-Packard Co, which climbed 2.6 percent to $14.16 on rumors that activist investor Carl Icahn is building a stake in the PC maker. The stock is down 44.5 percent for the year and ranks as the Dow’s worst performer. The S&P technology index was up 0.3 percent.
Tech also was supported by Cisco Systems, which gained 2.4 percent to $19.79 after the company presented its midterm growth strategy on Friday.
McDonald’s Corp gave the Dow a jolt, gaining 1.1 percent to $89.41, as its November sales were stronger than expected and showed a bounce back from a decline in October.
There was little news Monday about the negotiations over the “fiscal cliff,” a series of automatic tax hikes and spending cuts that could hurt economic growth next year. Concerns that lawmakers will not broker a deal have kept a lid on optimism in the equity market.
“There is a general sense that if a deal is struck, that we could have a further advance in the market at the end of this year as well as the first part of next year,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
A breakout to the upside on a cliff deal could take the S&P 500 back up to 1,474, just off the 2012 high for the index, said Elliot Spar, Stifel Nicolaus option market strategist in Shrewsbury, New Jersey.
The benchmark S&P 500 index has yet to see a move greater than 0.5 percent in either direction on any day in December, and hasn’t moved more than 1 percent either way in any session since November 23. However, the market has regained most of the losses incurred post-election as investors refocused on the fiscal cliff.
U.S. President Barack Obama met with Republican House Speaker John Boehner on Sunday to negotiate a budget deal. A Boehner aide said Monday that talks are continuing.
The Dow Jones industrial average rose 14.75 points, or 0.11 percent, to 13,169.88 at the close. The Standard & Poor’s 500 Index inched up just 0.48 of a point, or 0.03 percent, to 1,418.55. The Nasdaq Composite Index advanced 8.92 points, or 0.30 percent, to close at 2,986.96.
News out of Italy kept sentiment in check as Prime Minister Mario Monti said he would resign after the approval of the 2013 budget. The move added to uncertainty about progress being made to tackle the euro zone’s debt problem and drove Italy’s borrowing costs higher.
U.S.-listed shares of Nexen jumped 13.8 percent to $26.77 and the stock was the second-most actively traded on the New York Stock Exchange. On Friday, Canada approved a $15.1 billion bid by CNOOC Ltd for energy company Nexen.
The S&P materials index gained 0.7 percent and led the S&P 500’s sector index gains as shares of mining companies rose in sync with copper and gold prices. Shares of Freeport-McMoRan gained 1.1 percent to $32.04.
Volume was roughly 5.3 billion shares traded on the NYSE, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of roughly 6.5 billion.
Advancers outnumbered decliners on the NYSE by a ratio of about 17 to 13, while on the Nasdaq, seven stocks rose for every five that fell.
The euro stabilized near two-week lows on Tuesday as nerves calmed over Italy’s latest political turmoil and as prospects of more stimulus from the Federal Reserve pinned down the dollar.
The common currency stood at $1.2938, flat from late U.S. levels but above a low of around $1.2880 plumbed on Monday.
It has risen some 0.5 percent from Friday’s two-week trough around $1.2876. Immediate resistance is seen at $1.2973, a level representing the 38.2 percent retracement of its December 5-7 fall.
The euro found some support after Italian Prime Minister Mario Monti played down market fears over his decision to resign, saying there was no danger of a vacuum ahead of an election in the spring.
“The euro’s dip below $1.2900 proved to be short-lived,” said Vassili Serebriakov, strategist at BNP Paribas. “FX markets are showing some notable resilience following news of Monti’s imminent resignation.”
Monti’s move came after former prime minister Silvio Berlusconi abruptly withdrew support for Monti’s technocrat government, accusing Monti’s reform and austerity steps of dragging Italy “to the brink of a precipice.”
“There’s no doubt Monti’s resignation raised some concerns but it’s not like Berlusconi has strong public support,” said Katsunori Kitakura, associate general manager of market making at Sumitomo Mitsui Trust Bank.
Although Italian bond and shares were hit by the news, that did not lead to rise-averse sentiment in broader financial markets, partly on the view that debt buying program by the European Central Bank could curb selling in Italian debt, should their yields keep rising.
Another factor keeping the euro off its lows was a reluctance by investors to aggressively buy the dollar, given expectations the Fed will replace its expiring ‘Operation Twist’ program with another Treasury bond-buying plan at its December 11-12 policy meeting.
Many economists believe the U.S. central bank will announce monthly bond purchases of $45 billion, although some think it could surprise with a bigger amount to press borrowing costs lower. Such an outcome could see the greenback come under further pressure.
The dollar index slipped 0.1 percent to 80.311, retreating from at two-week high of 80.658 set on Monday.
The dollar was buying 82.37 yen, still not far from an eight-month peak of 82.84 set last month, though selling related to hedging for option triggers at 83 yen is likely to cap the dollar.
The prospect of fresh stimulus from the Fed and growing expectations the Bank of Japan could expand its asset-buying and lending program at a meeting next week kept high-yielding currencies well bid, despite worries that bullish positions were already stretched.
The New Zealand dollar held near ten-week high hit on Monday, fetching $0.8351, just shy of Monday’s high of $0.8355 and flat from late U.S. levels.
The Australian dollar dipped, however, following a surprise plunge in Australia’s business confidence.
The Aussie slipped 0.15 percent to $1.0472, though it is still comfortably within reach of an 11-week high of $1.0515 set last week.
There is no major economic data out of Asia on Tuesday. In Europe, the focus is likely to be on the monthly German analyst and investor sentiment survey from the Mannheim-based ZEW think tank.
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