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Dec 4, 2012

RTTNews | Wall Street at Close Commentary ( December 4, 2012 ) : Stocks Close Modestly Lower After Lack

RTT News: Global Financial Newswires

Stocks Close Modestly Lower After Lackluster Trading Day - U.S. Commentary

12/4/2012 4:23 PM ET
After moving mostly lower over the course of the previous session, stocks showed a lack of direction throughout the trading day on Tuesday. The lackluster performance reflected continued uncertainty about the looming fiscal cliff.
The major averages bounced back and forth across the unchanged line before closing modestly lower. The Dow edged down 13.82 points or 0.1 percent to 12,951.78, the Nasdaq slipped 5.51 points or 0.2 percent to 2,996.69 and the S&P 500 dipped 2.41 points or 0.2 percent to 1,407.05.
The choppy trading on Wall Street came as traders kept a close eye on developments in Washington, where lawmakers are struggling to reach a deficit reduction agreement.
Without action by Congress, approximately $600 billion in automatic tax increase and government spending cuts are due to go into effect at the end of the year.
House Republicans unveiled a plan Monday that they claim will reduce the deficit by $2.2 trillion over ten years, but the proposal was rejected by the White House.
While the Republican plan includes $800 billion in new revenues, the higher revenues are achieved by closing loopholes rather than raising tax rates on wealthy Americans.
Democrats have claimed that the Republican plan would increase the burden on the middle class and have instead called for the Bush-era tax cuts for high-income earners to expire.
In an interview with Bloomberg, President Barack Obama indicated that any deal will have to include higher tax rates on wealthy Americans.
Analysts have suggested that lawmakers will likely continue to wrangle over how to avoid the fiscal cliff until the days leading up to the end of the year deadline.
Among individual stocks, NetFlix (NFLX) surged up 14 percent after announcing a multi-year licensing agreement with Disney (DIS) that will make the Internet television network the exclusive U.S. subscription television service for films from Walt Disney Studios.
Big Lots (BIG) also showed a strong upward move after the discount retailer reported a much narrower than expected third quarter loss. Shares of Big Lots jumped 11.5 percent.
On the other hand, shares of Pep Boys (PBY) came under pressure after the auto parts retailer reported a third quarter loss compared to a year ago profit. The company also reported weaker than expected sales. Pep Boys posted a 10.4 percent loss on the news.
Sector News
Despite the lack of direction shown by the broader markets, networking stocks moved notably higher over the course of the trading day. The NYSE Arca Networking Index rose by 1.5 percent, reaching its best closing level in over two months.
Alcatel-Lucent (ALU) and Infinera (INFN) turned in two of the networking sector's best performances, advancing by 5.5 percent and 5 percent, respectively.
Computer hardware, oil service, and railroad stocks also saw some strength on the day, while moderate weakness was visible among natural gas and banking stocks. Most of the other major sectors showed even more modest moves.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index edged down by 0.3 percent, Hong Kong's Hang Seng Index inched up by 0.2 percent.
The major European markets also ended the day mixed. The French CAC 40 Index advanced by 0.4 percent, while the U.K.'s FTSE 100 Index and the German DAX Index both closed just below the unchanged line.
In the bond market, treasuries saw modest strength on the day after ending the previous session in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slipped 2 basis points to 1.608 percent.
Looking Ahead
Following today's lack of major U.S. economic data, trading on Wednesday could be impacted by the release of reports on private sector employment, labor productivity, and service sector activity.
Nonetheless, traders are likely to keep a close eye on developments in Washington, with any comments on the status of the fiscal cliff negotiations potentially driving the markets.
by RTT Staff Writer

NYT | Politics ( December 4, 2012 ): Republicans Balk at Short-Term Stimulus in Obama Plan

The New York Times

December 4, 2012


A cyclist in New York this week rode by a business that has been closed since Hurricane Sandy hit. The storm has contributed to the weakening of the economy.

Republicans Balk at Short-Term Stimulus in Obama Plan

The president claims the economy needs a shot in the arm now, but Republicans say the nation should not widen the deficit.

More Politics

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Obama Rejects G.O.P. Proposal

In an interview with Bloomberg Television, President Obama flatly rejected on Tuesday a Republican proposal to avoid an end-of-the-year fiscal crisis through spending cuts and limiting tax deductions, insisting that he would agree to no deal that did not include an increase in marginal tax rates on the wealthy.
Hillary Rodham Clinton, the retiring secretary of state, told Mayor Bloomberg she was not interested in running for the office.

Bloomberg Asked Clinton to Consider Succeeding Him as Mayor

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Debt Reckoning

Governors Urge Action on Looming Fiscal Crisis

A bipartisan group of governors who met with President Obama on Tuesday emerged from meeting to publicly urge him and Congress to resolve the pending fiscal crisis as soon as possible because the uncertainty, as one put it, "is creating havoc."

The Debt Reckoning

This feature follows the talks between President Obama and Congressional leaders over the so-called fiscal cliff.


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The New York Times
December 4, 2012

Afternoon Update


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Netflix Bests Starz in Bid for Disney Movies

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DealBook P.M. Edition ( December 4, 2012 ): TimesCast: Barney Frank Looks Back on His Career

Tuesday, December 4, 2012
TimesCast: Barney Frank Looks Back on His Career
TimesCast: Barney Frank Looks Back on His Career Representative Barney Frank reflects on his 32 years in office, offers advice for liberals and reveals the member of Congress he finds most irritating.
    Another View: Time for a Bold Choice for S.E.C. Head Richard E. Farley says that the early days of the Securities and Exchange Commission under the direction of its first chairman, Joseph P. Kennedy, indicate that the agency can quickly carry out bold, sweeping changes if the right leadership is installed.
    Breakingviews: S.E.C.'s Fair but Futile Stance on China-Based Auditors China's shaky accounting practices are a sound target for U.S. regulators. Or at least, they would have been 10 years ago, contends John Foley of Reuters Breakingviews.
    China Insider: From Bubble to Muddling Through? Last week, Bill Bishop's column examined the confusing picture for China's growth. New data is out, and the outlook is still confusing.
    After Defeat, Icahn Drops Oshkosh Tender Offer The activist investor Carl C. Icahn said he was dropping a tender offer for shares in the Oshkosh Corporation, after failing to collect at least 25 percent of the truck maker's stock.
    Baxter to Buy Gambro for $2.8 Billion The deal will give Baxter, a medical devices manufacturer, access to a lineup of medical equipment to expand its own range of dialysis products.
    Qualcomm Buys a Stake in Sharp The struggling Japanese consumer electronics giant Sharp said it would receive a $120 million investment from Qualcomm in a two-part deal that would make the American company one of Sharp's biggest shareholders.
    Buzz Tracker
    GCS Capital in Talks to Buy Dexia Asset Management The private equity firm GCS Capital of Hong Kong is in discussions to acquire the fund management unit of the struggling European bank Dexia, which has received several government bailouts as a result of the financial crisis. A price for the Dexia division was not disclosed, though analysts said it could be worth around $650 million.
    Quotation of the Day
    "The one who I think is the least constructive is Mitch McConnell and there's a problem here. I felt for some time if you're going to be in a leadership position you should have a very safe seat. If you're going to be in a leadership position in a legislative body you're going to have to do some things that are going to be unpopular.
    BARNEY FRANK, on the most irritating or difficult person he has dealt with in Washington.
    DealBook Video
    Obama Rejects G.O.P. Counteroffer on Fiscal Talks President Obama said on Tuesday that the Republican Congressional leaders' deficit reduction proposal, which is far heavier on spending cuts, "right now is still out of balance."
    Bank of America's Chief on Mortgages Brian Moynihan said that his bank's mortgage business is doing better, but that the uncertainty in Washington was already hurting business spending.

MarketWatch | Wall Street at Close Report ( December 4, 2012 ): U.S. stocks edge lower; fiscal cliff in view Worries about Chinese demand hits gold even as dollar weakens

By Kate Gibson, MarketWatch 

NEW YORK (MarketWatch) — U.S. stock indexes fell slightly Tuesday as political leaders wrangled in budgets talks to avert steep tax hikes and spending cuts that could push the economy into recession.
“The market today is another great example of where it just seems to be over the fiscal-cliff drama between the Republicans and the Democrats; the opening offers from both sides have been discounted,” said Jeffrey Kleintop, chief market strategist at LPL Financial in Boston. 

“All the letters and proposals are more for public consumption than actual negotiating purposes,” he added, referring to the back-and-forth between the White House and Republicans. 

Extending losses into a second session, the Dow Jones Industrial Average DJIA -0.11%  declined 13.82 points, or 0.1%, at 12,951.78. The S&P 500 Index SPX -0.17%  lost 2.41 points, or 0.2%, at 1,407.05, with telecommunications leading the losses and industrials faring best among its 10 sectors. The Nasdaq Composite Index COMP -0.18%  fell 5.51 points, or 0.2%, at 2,996.68.
Decliners nudged just ahead of advancers on the New York Stock Exchange, where 674 million shares traded. Composite volume topped 3.2 billion. 

At odds with what is more typically an inverse trade, commodities including gold and silver fell along with the U.S. dollar. “The dollar’s been going down, which would normally cause gold and silver to go up, at least in dollar terms,” commented Kleintop, adding that the atypical scenario may be related to Asian demand. 

Noting that China’s stock market has weakened to its 2008 lows, the strategist said the drop in Chinese equities and dollar-denominated commodities reflects “concern about Chinese demand for precious metals, even though some of the data from China has started to improve lately.”

Moving issues

Netflix Inc. NFLX +14.01%  shares jumped 14% after the video-subscription service claimed the rights to show Disney films soon after their theater runs.
Baxter International Inc. slipped 0.9% BAX -0.88%  after the medical-equipment maker said it would acquire Sweden’s Gambro AB, a privately held dialysis-product company, for about $4 billion. 

Big Lots Inc. BIG +11.52%  rallied 13% after the discount retailer reported a smaller third-quarter loss than Wall Street had expected. Read more about Tuesday’s biggest gainers and decliners.
Gap Inc. GPS -10.34%  declined 10% after the clothing retailer confirmed to Reuters that there had been no change in its dividend-payment policy, dashing expectations raised after other companies made special payouts. 

Darden Restaurants Inc. DRI -9.58%  fell 9.6% after the owner of Red Lobster and Olive Garden reduced its outlook for the year. 

Cliff notes

In an interview with Bloomberg News that aired Tuesday afternoon, President Barack Obama said the latest Republican budget proposal remains “out of balance.” 

“If we’re going to raise revenues that are sufficient, we’re going to have to see the rates on the top 2% go up. It’s just a matter of math,” he added. Read: Obama holds firm on tax hike for the wealthy.
In a statement Tuesday afternoon, House Speaker John Boehner said Republicans stood alone in making a “good-faith effort” to avert the fiscal cliff, with the Ohio Republican accusing the president of an unwillingness to compromise. Read Tell post: The independent analysis Republicans cite for not having to raise tax rates. 
The exchanges came a day after Republicans offered a plan involving steep cuts in government spending, but did not soften their stance against Obama’s proposal to hike taxes on top earners as part of reducing the nation’s debt. The White House rejected the Republican proposal as having left out higher taxes for the wealthiest 2%. 

“The market is holding out some type of hope for a resolution between now and end of the year, but the clock is ticking, and it seems to be running pretty fast now,” said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York. 

With four weeks to go before tax hikes and spending reductions automatically kick in, just how the fiscal-cliff issue is resolved is of less importance than getting it done, according to one market participant. Read: Governors getting say on fiscal-cliff talks. 
“The country, the economy and the American people just want to move on at this point. Yes, you have extremes of how this should be drawn up, and everybody has an educated opinion, but the general public and the market would agree that it’s an uncertainty issue, and nobody likes uncertainty,” said Chip Cobb, portfolio manager at BMT Asset Management in Bryn Mawr, Pa. 

Benefit of a short-term deal? After White House rejects House Republicans' proposal, hopes remain that Washington can strike a deal to avoid the so-called fiscal cliff. But would a short-term deal do any good? 

Calm before storm?

That said, Wall Street believes a deal will be reached, as illustrated by one gauge of investor uncertainty, the CBOE volatility index VIX +2.88% — which has not risen above 20 since July after climbing to within reach of 28 in June. See MarketWatch’s special section on the fiscal cliff.
“The market is clearly telling us there will be some form of resolution; otherwise, the VIX would be picking up dramatically, and we would have seen a bigger pullback than we’ve seen the last few weeks,” added Cobb. 

LPL Financial’s Kleintop agreed, saying the VIX’s current level “reflects nobody is panicking here, nobody is making big bets either way.” 

“If we’re still nowhere two weeks from now,” the VIX will rise more dramatically and stocks will do the same in the opposite direction, Kleintop added. 

The U.S. dollar DXY -0.26%  fell to a six-week low against a basket of currencies and to an almost seven-week low against the euro EURUSD -0.01%  after Greece garnered better-than-anticipated terms for its debt repurchase, bolstering hope that Athens would continue to receive aid and avoid a default. 

Gold fell to a four-week low, with the futures contract for February delivery GCG3 -1.28%  shedding $25.30, or 1.5%, to close at $1,695.80 an ounce on the Comex. The cost of oil CLF3 -0.81%  fell 59 cents to settle at $88.50 a barrel. 

Treasury prices rose, with the 10-year note yield 10_YEAR -1.11%   down to 1.61%. 

Kate Gibson is a reporter for MarketWatch, based in New York.

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