Stocks pull back on debt ceiling worries

The Dow falls 51 points as investors glumly watch Congress. Also weighing on markets are profits after last week's rally. Amazon.com hits an all-time high.

By Charley Blaine Jan 7, 2013 7:15PM
© CorbisLike it or not, the debt ceiling issue/crisis/tragedy/comedy was one reason the stock market was lower Monday and will almost certainly be at least a low-level source of annoyance over the next few weeks.

The problem, as the Bipartisan Policy Center noted, is that the government has until March 1, probably no later, to agree on how to deal with the nation's debt ceiling limit. Until then, the Treasury can scramble around to pay the government's bill. A move it could make is to delay tax refunds, which won't be popular.

Worst of all, no one is talking about much of anything. Republicans want cuts, particularly in entitlements (read Social Security and Medicare) and elsewhere but won't detail specific proposals. Democrats don't want to deal with entitlements and believe the real Republican agenda is to end government as we know it. But they don't appear to have a plan of their own.

There's talk -- not much more than that -- about minting a $1 trillion platinum coin and sticking that in the Federal Reserve Bank of New York to delay the inevitable. But that's talk. Traders don't believe it. Platinum was off $2.20 to $1,556.30 an ounce in New York on Monday, although it's up 1% since Dec. 31.

So, the Dow Jones industrials ($INDU) closed down 51 points to 13,384. The Standard & Poor's 500 Index ($INX), which hit a five-year high on Friday, fell 5 points to 1,462, and the Nasdaq Composite Index ($COMPX) fell 3 points to 3,099. The Russell 2000 Index ($RUT), which tracks small-cap stocks, was off 3 points to 876.
Three other factors were involved in the day's pullback.
  • Profit-taking after last week's big rally, the best since November 2011.
  • Worries about fourth-quarter corporate profits. The earnings season starts after  Tuesday's close with aluminum giant Alcoa (AA).
  • A $10 billion settlement between the government and 10 of the largest mortgage servicers over foreclosure-abuse claims. Among those signing on to the deal are the largest: JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C). The lenders agreed to $5.2 billion in mortgage assistance and $3.3 billion in direct payments.  

McDonald's (MCD) was the Dow leader, up $1.06 to $90.91, followed by Verizon Communications (VZ), which said its Verizon Wireless service added 2.1 million subscribers in the fourth quarter, more than expected. Shares rose 39 cents to $44.69.


Walt Disney (DIS) was the laggard, down $1.22 to $50.97 on reports it's looking for cost cuts and may consider layoffs. Boeing (BA) fell $1.56 to $76.13 after an electrical fire broke out in a 787 Dreamliner parked at a gate in Boston.


Amazon.com (AMZN), MasterCard (MA), Visa (V) and Alaska Air (ALK) hit all-time highs during the day. Amazon rose after an upgrade from Morgan Stanley and Macquarie Securities.


Health care and telecom stocks were the leaders on the day. Utility and energy stocks were the laggards.


Crude oil (-CL) was up 10 cents to $93.19 a barrel in New York. Gold (-GC) fell $2.60 to $1,646.30 an ounce. Interest rates were down slightly, with the 10-year Treasury yielding 1.903%, down from Friday's 1.915%.

20Comments
Jan 7, 2013 9:18PM
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"Crude oil () was up 10 cents to $93.19 a barrel in New York."

 

Why is crude up when a report came out last week stating that the global supply was fine, especially in the U.S.?? What a scam!

Jan 7, 2013 9:03PM
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This is the final line in the sand with a spending drunk administration. Republicans here this. NO NEW SPENDING LIMITS OR DEBT CEILING no matter what offers come from the other side. America is financially sick and dying. There is no better time than now, with O holding us hostage for four more years anyhow, to draw the line. It has to happen sometime soon - may as well be now!
Jan 7, 2013 8:30PM
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Oh what a difference a weekend makes.
Jan 8, 2013 12:10AM
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Stocks are a bubble! The market is overvalued. Google for HAVE WE SEEN THE BOTTOM IN STOCK MARKET to understand the valuation problem! Bernanke's printing press will not be able to save this market.
Jan 8, 2013 12:04AM
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Another problem for wall street is the fact that the FED's sugar teet is going to dry up.  No more free money to prop up stock prices.  The slowing and eventual stopping of the QE programs will force the street to stand on its own.  
Jan 7, 2013 7:58PM
Jan 8, 2013 1:28AM
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I give it two months tops for the reality check that's coming. This time when it bottoms out it might not come back!!
Jan 8, 2013 5:20AM
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You cannot balance the budget with just cuts ! Just like you cannot create jobs with tax cuts ! The only way is to raise revenue and cut spending ! Ending the war in AFG is a start ! Ben and the FEDs need to KILL QE3 and stop pumping money into wall street at 40 BILLION a month. Defense needs to be cut big time! Any revenue raised should be put to the debt only ! Republicans are borrow and spend and Dems are tax and spend. And wall street is the 47% mooching off of America.. They truly are the biggest joke of all ! Remember it was all them pesky bank tellers that made wall street go broke and meltdown ... LMFAO.... Only in the USA , land of the free ? Home of the truly stupid...
Jan 8, 2013 1:39PM
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Interesting libbies like Pete don't get close to understanding it. So, he uses name calling. Hey Pete boy, O increased the national debt 60% during his first disastrous term. As for gradually winding the deficit down, he has no plan for that either. Until you cats feel enough pain (which is coming), you will never understand. Enjoy your ignorance!
Jan 8, 2013 11:39AM
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i agree that we need to cut and control spending, especially getting rid of waste and fraud in our programs (and this includes the military as well, I saw it first hand when I was in the Air Force).  So to a degree I agree with the Republicans that enough hasn't been done in this area, but why does it always come down to this with the GOP (from this article):

 

   "Republicans want cuts, particularly in entitlements (read Social Security and Medicare) and elsewhere but won't detail specific proposals"

 

Why does the GOP go after these programs so hard, when they in fact have their own source of funding (payroll taxes and Part B monthly premiums)?  The GOP never talks about Pentagon spending, Farm Subsidies (which go primarily to large farm corporations in red Farm Belt states) or taxpayer subsidized crop insurance, tax credits to oil companies which frequently report record profits, aid to Israel, etc.

 

The GOP has picked up the label of only supporting the wealthy, and wealthy people don't need SS or Medicare, so is the GOP attitude one that says if the wealthy don't need it, no one does?

 

A copy/paste from another article in today's MSN Money page:

 

"....the end of the temporary two-year reduction in an employee's share of payroll taxes (from 6.2% to 4.2% of covered payroll) removes a linkage between Social Security and broader government funding that program defenders are glad to see. They want Social Security to be treated independently of broader deficit discussions. The program, they note correctly, has never added a penny to federal spending deficits."

 

Decide for yourself, we need to cut spending, but let's be intelligent about how and where we do it.

 

 

Jan 7, 2013 9:45PM
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First, Your party (republicans) spent 11 trillion of the 17 trillion dollar debt

Second, by not raising our debt ceiling it COSTS MORE money to pay back our DEBT with a much higher intrest rate--- Idiot

Here is one thing STUPID republicans LIKE RICK never UNDERSTAND.....If you cut spending dramticaly it will crash the economy....you have to do it gradually and increase spending cuts as the economy improves.....

It's like taking all your money and paying off a credit card debt...Now you have no money for food, rent, entertainment....You lose your house and starve....Same thing would happen with the economy...

I just owned you...your welcome
Jan 7, 2013 9:48PM
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republicans are the reason for all the problems, they won't our president to fall, they are so prejudice, and the elephants need to mow there yard and get rid of boenher, Lindsey from s.c. and all the rest of the money hungry elephants, and especially lying ryan, he is the reason for all of the idiots in congress, he thinks he is smart, the only thing he is are romney's and the republicans puppet!
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