Stocks rebound from 'fiscal cliff' worries

The Dow ends down 18 points after falling as many as 151. The catalyst: News that the House will meet Sunday to discuss the fiscal cliff dispute. Apple leads the rebound. Jobless claims fall, but consumer confidence sags.

By Charley Blaine Dec 27, 2012 2:18PM
© Image Source, Getty ImagesUpdated: 5:32 p.m. ET.

Stocks stormed back from sharp losses Thursday on news that the House of Representatives will convene Sunday evening in an attempt to end the nation's bitter budget dispute.

While the major averages suffered their fourth losses in a row, the big rebound was welcome news after Senate Majority Leader Harry Reid, D-Nev., had said earlier that a resolution to the "fiscal cliff" fight before Jan. 1 appeared unlikely because Republicans wouldn't cooperate.

After Reid made his comments, the Dow Jones Industrial Average ($INDU) fell to a loss of as many as 151 points and dropped under 13,000 for the first time since Dec. 4.

With the news on the House Sunday session, the blue chips rebounded to 13,096, down 18 points on the day. The Standard & Poor's 500 Index ($INX) was off 2 points to 1,418, and the Nasdaq Composite Index ($COMPX) dropped 4 points to 2,986.
If a deal can't be struck between Democrats and Republicans, an $800 billion combination of tax increases and federal spending cuts will kick in, which could set off a new recession. When the "fiscal cliff" provisions would kick in not clear. It looks like March. 

The idea that no one would even try to address the budget dispute was unsettling to those on Wall Street actually working. Typically, volumes are down between Christmas and New Year's.

At the same time, an even nastier battle is looming on raising the nation's debt ceiling. The ceiling technically will be reached by Monday, Treasury Secretary Tim Geithner wrote to Congressional leaders late Wednesday, but the Treasury has the flexibility to keep the government operating until probably March 1.

"I have to be very honest," Sen. Reid said as the Senate convened Thursday in an unusual session between Christmas and New Year’s Day. "I don't know time-wise how it can happen now."

Reid offered his pessimistic assessment shortly before President Obama, cutting his vacation short, arrived back in Washington on Air Force One. White House officials said that before leaving Hawaii, the President had spoken separately by phone with each of the four Congressional leaders about the status of negotiations, but they gave no details of the discussion.

'Fiscal cliff' sets off a sell-off and a rebound
Since the November elections, the stock market has moved up or down depending on if investors believed a budget deal might be coming together. Thursday was another one of those days.

The S&P 500 had been down as many 18 points and nearly fell below 1,400 on an intraday basis for the first time since Nov. 28; it hasn't closed under 1,400 since Nov. 27. The Nasdaq had been down as many as 39 points.

The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, had dropped as many as 38 points in the early afternoon but recovered to 2,633, a loss of 4 points.

Apple (AAPL), which has the largest weight in the index, had recovered entirely from a tumble down to $505.60. It closed up $2.06 to $515.06. For Apple's shares, $505 has emerged as a key support level.

Economy appears held back by budget fight
The pessimism about the "fiscal cliff" came as the Conference Board said the budget debate caused consumer confidence to fall more than forecast in December.

The Conference Board's index of sentiment fell to 65.1 from a revised 71.5 reading for November. The gauge was projected to fall to 70, according to the Bloomberg survey median.

And there were indications that the holiday shopping season fizzled at the end as consumers worried about what might happen starting in January.

There was some good news Thursday: New-home sales were up 4.4% in November from October to a seasonally adjusted 377,000 units. The sales rate was the best since April 2010 and was up 15.3% from November 2011. Homebuilding shares, however, were lower.

At the same time, initial jobless claims fell to 350,000 in the week ended Dec. 22. The week before, claims were at a seasonally adjusted 362,000. Claims have recovered from an uptick after Superstorm Sandy. 

December and the year struggles to a close
Not only did the market fall for a fourth straight day, it was down for the fifth day in the last six. If the market ends the month at current levels, the Dow will be up 0.5%. The S&P 500 will be up 0.1%, with the Nasdaq down 0.8%. Apple is weighing on the Nasdaq.

For the year, the Dow is up 7.2% with the S&P 500 up 12.8% and the Nasdaq up 14.6%.

Only three of the 30 Dow stocks were higher: MSN Money publisher Microsoft (MSFT), UnitedHealth Group (UNH) and Wal-Mart Stores (WMT). The Dow's weak links were Cisco Systems (CSCO), Alcoa (AA) and JPMorgan Chase (JPM).

Meanwhile, 188 S&P 500 stocks were higher, along with 32 Nasdaq-100 stocks.

Crude oil
(-CL) settled down 11 cents to $90.87 a barrel in New York but is still up 2.5% this week. The retail price of gasoline was up 1.4 cents to $3.261 a gallon, according to AAA's Daily Fuel Gauge Report.`

Gold (-GC) was up $3 to $1,663.70 an ounce. Interest rates fell as investors sought safety. The 10-year Treasury yield fell to 1.715% from Wednesday's 1.758%.

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73Comments
Dec 27, 2012 3:30PM
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I've have had about as much of this crap in D.C. as anyone can stand. COMPROMISE is the word and no one will.  Enough, the Middle Class who pays the majority of the taxes the Government takes in is ready to get hit with a 4% salary cut January 1st, plus a deeper Recession (we never got out of the 2008 one)!

We must march in front of these clowns in person to show them "We the People" will not take this any longer.  The date has been set, AUGUST 28, 2013 in Washington, D.C., the MIDDLE CLASS RIGHTS march on Washington will take place.  Only then, when thousands of us show up, will our elected officials know "We the People" are serious about this mess.

 

Dec 27, 2012 3:43PM
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We have to replace all of them! How do we recall the president and the congress?

If they can't sit down and work with each other then we have to fire them and put people in there who will work towards a solution, make them vote and put their votes on record.

I'd love to find a way to withhold their pay until they come up with a solution, that means they lose the pay for that period - no getting it back by posturing till the last possible minute.

Dec 27, 2012 3:54PM
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Did anyone seriously believe they would come to an agreement?  Hope, perhaps.  But believe?

The country itself is divided and those of us that understand that  "a good compromise is one nobody likes" are very much in the minority.

As a side note, my company is not hiring due to waiting to see how the Health Care laws pan out - not because of fiscal cliff fears.
Dec 27, 2012 5:18PM
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Simply fed up with our government.  Angry that the people always pay the price for their incompetence.  What an embarrassment anymore to live in the US.
Dec 27, 2012 4:54PM
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They will not cut spending.  They derive their power from spending other people's money.  It will be smoke and mirrors and people will see through it sooner or later.
Dec 27, 2012 4:54PM
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Our so-called Congressional leaders each want the other to propose a plan. "With a Dec. 31 deadline for an agreement to avert the so-called "fiscal cliff" rapidly approaching, leaders in each party demanded the other side take the initiative. " I would not call them leaders at all!
Dec 27, 2012 4:51PM
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The FEDS are pumping the market hard to day!  Don't be fooled by this turn around.  There is no way they are going to come to any kind of agreement in Washington.  It's not in these guys to worry about the American people.  

 

Dec 27, 2012 3:07PM
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They might as well let it go over the cliff. Wall Street gave away any gain would would have recieved if they had settled it anyway. Investers were set up to lose either way it turned out!!!
Dec 27, 2012 5:31PM
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The fiscal cliff is all "priced in." So are higher taxes for every one. So are cuts in defense spending, social security, medicare, medicaid. So are huge cuts to unemployment insurance and relief programs like school lunch (breakfast and dinner now)

 

Going over the fiscal cliff means nothing to our irresponsible and feckless politicians. Going over the cliff will be instituting an austerity plan starting the first of the year. If going off the fiscal cliff sends the country back into recession (live we ever left in the first place), our politicians don't are. It doesn't effect them getting their paychecks or givng themselves raises. It doesn't effect their pensions plans (that the American taxpayer pays for). Nor does it effect their gold-plated health insurance and health care programs (again all paid for by you know who).

Dec 27, 2012 5:14PM
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They will kick the can again ~ no one has the cajones to make difficult decisions due to their own job being more important than their constituencies!
Dec 27, 2012 4:29PM
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Ha...the scumbag big boys have been 'screwing' with each other the last few days since they practically are the only players now...It was down 130 pts on this news then 'suddenly' it springs back up about 100 pts without any NEW news spoken....
Dec 27, 2012 5:33PM
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LET ME MAKE THIS PERFECTLY CLEAR.  CONGRESSMEN ARE USING THEIR POWER TO MANIPULATE THE MARKETS FOR PROFIT.  WHY FIX THE PROBLEM WHEN YOU CAN QUICKLY MAKE MORE THAN A YEARS PAY BY MOVING THE MARKETS?  IT'S BEEN GOING ON FOR A WHILE NOW.  MOSTLY BOEHNER & REID BUT YOU KNOW THAT MOST OF THEM ARE RAKING IN PROFITS FROM IT.

 

THIS MORNING, REID SET UP THE MARKET FOR A MAJOR BEAR ATTACK.  THEN, JUST AS I

HAD PREDICTED, THEY CAME OUT WITH SOMETHING "POSITIVE" IN THE AFTERNOON TO

SQUEEZE THE SHORTS AND MAKE INSTANT MONEY (WITHOUT WORKING-JUST THE WAY THEY LIKE IT!  JUST ANOTHER ANCILLARY BENEFIT OF BEING IN CONGRESS).  THEY ARE

GOING TO DO WHAT THEY ARE GOING TO DO BUT, WHY NOT MILK IT FOR ALL IT'S WORTH?

 

THESE ARE NOT PUBLIC SERVANTS.  THEY ARE "SELF SERVANTS"!  OPEN YOUR EYES!

Dec 27, 2012 5:42PM
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The House and the Senate each have their own agenda!!!  And trust me, the Republican's will stick up for their group and the Democrats will fall in line behind the President.  Neither group wants to do what is best for the country!!!!!!!!!!!
Dec 27, 2012 6:51PM
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Option 1

I have a plan!  Everyone in Washington step down and let some people that really want to fix America's problems have a chance at it.  I say no one with net worth over a million should be running this country.  That way what every they do will affect them also.

 

Option 2

Tell our leaders in Washington that if they don't get this passed by Dec. 31, 2012 then they all don't get to ride on the government's planes, no health care for them, and no pay check for the year 2013. 

Dec 27, 2012 4:11PM
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Hey all you semi-automatic gun owners your practice targets are waiting for you in DC.  Happy hunting and help accelerate getting the fiscal cliff issue resolved.  Thank you!
Dec 27, 2012 5:25PM
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Most of us can't get to washington dc for a protest march.  What we can do is let our representatives know that failure to reach a realistic, effective plan for addressing our budget crisis will result in our not voting for them in the next election cycle - makes no difference what their party affiliation is. Blind allegiance at the expense of this Country's economic future makes no more sense than the polarized, ineffective congress that represents us.

 

It really is a time for term limits, "replacement of the entire House and Senate" and the creation of a centralist 3rd party.  

Dec 27, 2012 10:49PM
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The wealthy can ride out the recession, just like they did before since they have reserve assets and they actually gained wealth during the last recession.  The poor and middle class, who are already weakened by the last recession will feel the brunt of the cliff with lost jobs and declining wages again.
Dec 27, 2012 7:05PM
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Has anyone noticed that Congress will not be affected by the budget cuts?? That right there should tell you everything you need to know about those slimy bastards. If all 50 states started a recall of their congresspeople, we could push it through, start over and actually make a difference. The American people know what compromise is. WE, the People can run this country -- and hire some 'new blood' to implement it.
Dec 27, 2012 8:07PM
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What gets about as bad as all this talk of a "rebound" in a highly manipulated market, is how yesterday the down was attributed to this so-called fiscal cliff, even when the sales reports came in and showed that this Christmas season people spent less then they had in prior years.  And rather then acknowledge the obvious, that people are too flat out broke to be able to spend more, instead they have to argue that it was Sandy....

 

Do they honestly believe that all these Christmas shoppers do all their xmas shopping before Thanksgiving?  Or that if people in the East Coast had the money to spend, they would not have done so latter?  Try this on for size, the rate of inflation has over-stepped any sort of pay raise that the working class has seen.  This combined with not just unemployment, but involuntary part time employment, and the part time jobs that have filled in the gaps for those who lost their former careers tend to pay worse salary then what people were making before.  The result is, that people's net disposable income has taken a hit; and without running up the plastic more, and getting into fiscal troubles as they face their own debt worries, people have had to cut back their own spending, hence the sales reports.

 

But they don't want to admit that.  It's simple folks, if you want consumers to spend more, then there has to be the sort of salary and real wages, as opposed to nominal wages alone (aka adjusted to inflation) which leaves people with more disposable income, so they have more to spend and don't have to cut back.  If the working class doesn't see more income, don't go crying about sales reports, as people do the financially wise thing, which is to not go ahead and spend what they don't have.  Sheesh, sometimes these stories can be about as bad as Washington's wrangling over party lines, as they cater to the lobbyists, and ignore the stark realities that is facing the nation's working class as a whole....

Dec 27, 2012 7:01PM
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We have been under the rule of idiots!!! These people are not our country leaders but people to show the world what idiots look like. I would rather deal with a child!!!.
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