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%.

More from Money Now

73Comments
Dec 28, 2012 12:45PM
avatar

Many are calling for compromise.  Unfortunately when you are negotiating how far to pull the trigger on the gun to your head, compromise isn't really what you want.  Each side thinks the other has a gun to the head of their interests.  There won't be much compromise.  We will go over the cliff and then the Dems will get what they want, to an extent, by passing legislation after the fact.  Republicans will get nothing out of the deal except blame.

Dec 28, 2012 9:38AM
avatar
I don't see anyone marching on DC, they cannot afford to. I see people walking away from jobs that cost too much to have and a flight away from toys and social acceptance. I've always chuckled at the rich paying too much in taxes. They inherit things and make profit off them. They invest and get returns. Neither of these are really self-made or are good for America. By 2014, people will be doing garage and basement enterprises that are born from work-a-day skills and experience. Law Firms an legalese will attempt to control but fail by sheer dynamic. Eventually, inheritors and hired-in executives won't be able to sustain and the oligarchies will drain. To some degree we all see this trend now but won'e acknowledge it. Regular people know almost everything about anything built during the last 100 years or so. Management are administrative, so they know the paper trail. If you needed to feed yourself, you'd want the application not the administration. If you want to know the unfortunate part-- Russia sat back and watched us greedily send ourselves into this Abyss. Over these next 2-3 years, they can sweep into the Middle East and position themselves north of China, West and with the latest arms deal, have India at their Southern Borders. The United States was the Joker. The handwriting was on the wall for us in 1981 when we started putting college degrees in middle management without validating ability. Our universities pump out administrators not enterprisers. Our greatest problem is self inflicted False Elitism.
avatar

Better have some guns when we march on washington dc.  They have alot of parades there and dont care what we think.  When the shooting starts then the politicians take some notice but when you shoot a few of them then you bet they will act.  Most politicians make more money from the special interests than their salary.  Who do you think they REALLY listen too?

 

I was going to invest in a small cap company without any debt, but then I found out the CEO makes TWICE what the president does!  Its a small company!  Of course it is well run, no debt and the CEO is well paid.  We need to double the politicians salary and FORBID SUPERPAC AND RICH PEOPLE BUYING THEM!

 

Beats shooting them!

 

 

Dec 27, 2012 10:49PM
avatar
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 10:46PM
avatar
The House will most likely allow the economy to go over the fiscal cliff.  Since the GOP represents the wealth class, whether they agree on a budget that will allow a tax increase on those making $250,000 and over, or just going over the cliff will not make any bit of difference to them.  Since they are going to pay one way or the other anyway, they might as well take everyone else with them. It's called making everyone pay, including the poor. Isn't that what you want?
Dec 27, 2012 10:10PM
avatar
Stormed back? Isn't that a little misleading?
Dec 27, 2012 9:40PM
avatar

Fox News has been continually reporting California's projected budget deficit will be 28 billion.

In fact, the projected deficit here is 1.9 billion. It's improving a lot since Democrats have had control. They haven't bothered to correct this, of course, and most people watching Fox News will hear only what they spew, and believe it. Meanwhile, Boehner and his cohorts in the House have been spewing a lot of crap too, similar to the way Fox News does. I wonder how many people they hope will buy their baloney & not see through it.

Dec 27, 2012 9:08PM
avatar
the republican party is out of control and should be scrapped any american can do a better job than these nuts.
Dec 27, 2012 8:58PM
avatar
One small benefit of going over the cliff is that it may help WAKE everyone up to how expensive our government has become. Even with all the posible new taxes the government would still be running a deficit. alexkrzyston.wordpress.com
Dec 27, 2012 8:50PM
avatar
Once down 151... the greediest are testing the waters to see how much they can seep out before the flood gates open. A reminder that a fair number of idiots "let it ride" because they don't know how to manage their investments. TODAY would be a good day to find out how, tomorrow may be "the" day it all goes away.
Dec 27, 2012 8:33PM
avatar

We're SAVED!!!

 

The House is meeting on Sunday!!

 

woo hoo!

Dec 27, 2012 8:21PM
Dec 27, 2012 8:07PM
avatar

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 7:47PM
avatar

HAIRY REED AND MANCY PELOSI AND THE REST OF THE LIBERAL NO BUDGET BIG SPENDING ANTI AMERICANS HAVE TO GO

NOW! THEY ARE THE ONES BLOCKING ANY CUTS AND SPENDING AND THEY WANT TAX INCREASES! OBAMA IS ALREADY

RAISING TAXES WITH FEES, REGULATIONS, OBAMACARE! LOOK AT FUEL ENERGY AND FOOD PRICES! THIS IS ALL CAUSE OF

HIS LEFT WING AGENDA! HE EVEN SAID THIS IS WHAT HE WAS GONNA DO! HE DOESN'T CARE IF U VOTED FOR HIM OR NOT!

 

 

Dec 27, 2012 7:05PM
avatar
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 7:01PM
avatar
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!!!.
Dec 27, 2012 6:51PM
avatar

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 6:25PM
avatar
It's all dramatics with these politicians. I think they watch too much reality TV. They will compromise on something short term in the last day or 2 of the year. Stock market will rise about 700-800 pts by end of January. It's all phony people wake up.
Dec 27, 2012 6:06PM
avatar
Looks to me like the oil manipulators are running things today.The government is about to shrink my pay check so these sad sacks want to push gas prices back up.Do we really N E E D a stock market ?????????
Dec 27, 2012 5:52PM
avatar

Wall street is not "falling for it".  They are a part of it.  This country is run by the super-rich.

End of story!

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM]

  • Aug gold touched a session high of $1311.80 per ounce in early morning pit trade but gave up the gain as it slipped below the unchanged line in afternoon action. It brushed a session low of $1303.50 per ounce and settled 0.1% lower at $1304.50 per ounce.
  • Sep silver touched a session low of $20.94 per ounce after retreating from a session high of $21.10 per ounce. It then chopped around near the break-even line and settled unchanged at $21.00 per ounce.
  • Sep ... More

MSN MONEY'S