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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86Comments
Dec 27, 2012 5:58PM
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JEB47 WROTE:

Old Geezer: This is exactly the kind of rhetoric that adds to the problem.  As long as we

keep calling each other names we can't expect much progress.  Our nation was founded on

compromise.  If Alexander Hamilton and Thomas Jefferson had descended to this level we

wouldn't even be a nation.  They were farther apart philosophically than today's

politicians.

MY RESPONSE TO JEB47:

YOU ARE AN IGNORANT FOOL!!!!!     DO YOU CALL LOADED MUSKETS COMPROMISE?????!!!!!!

OUR COUNTRY WAS FOUNDED WITH BULLETS FLYING.   WHERE'D YOU GET YOUR SCHOOLING???

ENGLAND?????????????????


Dec 27, 2012 5:52PM
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Wall street is not "falling for it".  They are a part of it.  This country is run by the super-rich.

End of story!

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 5:40PM
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Trust me, this happens each time the government plays around with the debt limit.  And Wall Street falls for all this hook, line and sinker!  MUMBO JUMBO, MUMBO JUMBO!!!!!!!!!!!!!!!!
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 5:31PM
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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 5:25PM
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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 5:24PM
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The TEA party fascist are screwing us on the cliff problem.Congress wil get a 6

or 12 month fix.It`s a lame quick fix.

Dec 27, 2012 5:23PM
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"Ask not what your country can do for you , but what you can do for your country". Now!  its, " Ask what the country can do for you,  but what I cannot and will not do for my country"!  We became a society of wants!!  Thanks to Obama!!!

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 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 4:56PM
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The Republican, Neo-Con. Libertarian and Tea Party Fascists plans to take over America will never succeed as long as all us vigilant, just and patriotic Democrats are there to STOP you.

 

It will NEVER happen under our watch!

 

youtube.com/watch?v=7BZCfbrXKs4

 

God bless Freedom, Prosperity and Justice for all in America!

 

P.S. DIE WALL STREET, DIE!

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 4:54PM
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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 4:51PM
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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 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 4:19PM
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lot of talk but know body does anything i mean the people that post on here. stand up and do something they can be fired
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 4:10PM
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You can blame Speaker of the House John Boehner for all of this.  It is always his way or the highway.  Voters will remember this in November of 2014!
Dec 27, 2012 4:09PM
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HEY DEMOCRATS, SOCIALISTS, NEGROES, MEXICANS, 47%ER'S, MORONS, IDIOTS, WELFARE AND FOOD STAMP JUNKIES, FRAUDSTERS, AND SO ON:

ENJOY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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