Broadgate: Market News 12/12
12 December 2012
Stocks rose on Tuesday, led by gains in technology companies, helping the S&P 500 end at its highest level since Election Day.
A 2.2 percent gain to $541.39 in Apple’s stock lifted the Nasdaq, as the largest U.S. company by market value rebounded from a week in which investors took profits before a possible tax rise next year. Prior to Tuesday’s trading, Apple shares had lost 25 percent from an all-time intraday high hit in September.
Stocks pared some gains by late afternoon as more news on the “fiscal cliff” negotiations emerged. U.S. Senate Majority Leader Harry Reid said it will be difficult to reach agreement resolving the cliff tax hikes and spending cuts before Christmas.
“There’s been a real explosion in anxiety over this thing. Because markets have become the way they are, you’ve got people just stepping back,” said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
“There’s a tremendous absence of liquidity in the market,” he said.
The S&P 500 had lost 5.3 percent in the seven sessions following Election Day as investors refocused on the threat posed to the economy by the fiscal cliff, a series of automatic spending cuts and tax increases. Markets have mostly recovered those losses, but volume has been thin, suggesting investors are not betting aggressively due to the uncertainty.
The Dow Jones industrial average was up 78.56 points, or 0.60 percent, at 13,248.44. The Standard & Poor’s 500 Index was up 9.29 points, or 0.65 percent, at 1,427.84. The Nasdaq Composite Index was up 35.34 points, or 1.18 percent, at 3,022.30.
Volume was roughly 6.43 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.
Other major tech stocks also rose. Texas Instruments gained 4 percent to $31.01 after bumping up its profit target late Monday. That helped other chipmakers rally, with the PHLX Semiconductor index up 1.9 percent. Microsoft rose 1.4 percent to $27.32.
The lack of demonstrable progress in the fiscal cliff negotiations has kept investors from making aggressive bets in recent weeks.
Republican House Speaker John Boehner called on President Barack Obama to propose a counter-offer on Tuesday.
Retailers like luggage maker Tumi Holding Inc and Michael Kors Holding gained on Tuesday after a positive report from Goldman Sachs Equity Research. Tumi was up 4.7 percent to $21.92 and Michael Kors gained 2.4 percent, reaching $50.92.
By contrast, discount retailers Dollar General and Family Dollar declined. Dollar General, whose shares fell 7.8 percent to $42.94, said it sees margins under pressure in 2013. Family Dollar shares dropped 8.4 percent to $64.68.
SPX Corp shares fell 9.1 percent to $62.07 and the stock was the biggest percentage decliner on the New York Stock Exchange after sources said the company is in exclusive talks to buy rival Gardner Denver, in a merger that could create an industrial machinery conglomerate with a market value over $7 billion.
The U.S. Treasury is selling its remaining stake in insurer American International Group Inc. AIG’s shares were up 5.7 percent at $35.26.
The Fed began a two-day policy-setting meeting on Tuesday. The central bank is expected to announce a new round of Treasury bond purchases when the meeting ends on Wednesday to replace its “Operation Twist” stimulus, which expires at the end of the year.
Advancers outnumbered decliners on the NYSE by about 2 to 1, and on the Nasdaq by nearly 9 to 4.
The dollar was under pressure on Wednesday, hovering near multi-month lows against higher-yielding currencies, as markets bet the U.S. Federal Reserve would announce more stimulus later in the day.
The euro was also buoyed following surprise strength in German economic sentiment, which contrasted with recent signs that concerns over the fiscal cliff are hurting U.S. economic sentiment.
There was limited reaction in major currencies after North Korea launched a rocket, which critics say is a disguised ballistic missile test, as the news had little immediate implications for the global economy.
“The Fed tends to take preventative steps on the economy, considering the way the Fed started QE3. Given concerns about the fiscal cliff, I think the Fed will do what’s been discussed in markets,” said Hideki Amikura, forex manager at Nomura Trust Bank.
“In that case, the euro/dollar should rise further,” he added.
The dollar index stood at 80.04 .DXY, flat from late U.S. levels but down 0.5 percent so far this week as the euro popped back above $1.3000, pulling away from a two-week low around $1.2876 plumbed Friday.
The Fed, which ends a two-day policy meeting later on Wednesday, is expected to replace its expiring ‘Operation Twist’ program with a fresh round of outright bond purchases.
Many economists believe the U.S. central bank will announce monthly debt purchases of $45 billion.
“Although the view that the Fed will shift to outright Treasury purchases is now very widely shared by market participants, we do not believe it has been fully reflected into markets or in positioning,” said Vassili Serebriakov, a strategist at BNP Paribas.
The euro was last at $1.3007, having retraced 50 percent of its December 5-7 fall from $1.3127 to $1.2876, and keeping gains after Tuesday’s surprisingly strong Germany’s ZEW economic sentiment index.
Morale among German analysts and investors improved sharply in December, fanning hopes that Europe’s largest economy may avoid recession this winter despite all the grim news out of other parts of the region.
That contrasted with fall in U.S. consumer confidence, which data showed last Friday posted largest drop since March 2011 in November on worries about the fiscal crisis.
Many investors are expecting U.S. political leaders to eventually reach a deal to reduce the planned fiscal tightening but there has been no concrete sign of progress so far, with top Republican lawmakers rejecting a new offer by President Barack Obama on Tuesday.
HUNGRY FOR YIELDS
The specter of further easing in the United States is putting a fresh focus on higher-yielding currencies.
The Australian dollar hit a three-month high of $1.0541 and last stood at $1.0533, near late U.S. levels.
“The Aussie remains one of a few currencies with yields therefore investors have no choice but to buy,” said a trader at a European bank.
The Canadian dollar was near a seven-week high of C$0.9858 per U.S. dollar hit on Tuesday while the New Zealand dollar also stood near a nine-month peak of $0.8398.
The Australian dollar also hit a 8 1/2-month high of 87.01 yen as the yen has been hurt by speculation that the Bank of Japan will take more aggressive easing steps after a likely victory of the Liberal Democratic Party in the country’s election on Sunday.
LDP leader Shinzo Abe has called for unlimited easing. The Bank of Japan is also expected to expand its own asset-buying and lending program at next week’s policy meeting.
Against the U.S. dollar, the yen was little changed at 82.55 yen, not far from 7 1/2-month peak of 82.84 yen hit almost three weeks ago.
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