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