Stocks Finish Flat as Budget Debate Shows No Signs of Progress
30-Nov-12 16:15 ET
[BRIEFING.COM] Equities were on uncertain footing during the first hour of the session. The S&P 500 followed the early indecision by sliding to its lows just above the 1410 level. A familiar theme played out intraday as President Obama and House Speaker Boehner held another round of press conferences. The President reiterated the importance of reaching compromise and expressed hope that enough Republicans can be convinced to break rank and vote in favor of his budget proposal. Meanwhile, House Speaker Boehner maintained his prior stance and said that Republicans are willing to compromise if Democratic lawmakers agree to spending cuts. Until then, the two sides remain at a stalemate. The benchmark average spent the majority of the session in the red, but a buying surge shortly before day's end lifted the index to flat close.
Financials saw relative weakness as the budget debate remains in focus. Citigroup (C 34.57, -0.64) lost 1.8% and was the weakest performer among the majors.
Though U.S. financials underperformed, their European counterparts advanced. Barclays (BCS 15.83, +0.17) and UBS (UBS 15.70, +0.11) added 1.1% and 0.7%, respectively. Earlier, Reuters reported Barclays may cut as many as 3500 investment bank positions and reduce the scope of its Asian operations.
Tech stocks lagged the broader market and large cap names saw weakness. Apple (AAPL 585.28, -4.08), International Business Machines (IBM 190.07, -1.46), and Microsoft (MSFT 26.61, -0.33) all lost between 0.7% and 1.2%.
Elsewhere, VeriSign (VRSN 34.15, -5.19) slid 13.2% after its updated agreement with the Department of Commerce limited the company's ability to increase domain registration prices.
Also of note, Groupon (GRPN 4.14, -0.40) fell 8.8% after company spokesman said Chief Executive Officer Andrew Mason will not be replaced in the near term.
Consumer discretionary stocks saw weakness and carmakers weighed on the sector. Earlier, Ford Motor (F 11.45, -0.08) said it plans to increase its electric car market share to 11.0%, from the current 5.2%. Despite the news, shares of Ford finished lower by 0.7%. Looking at other automakers, Honda Motor (HMC 33.29, -0.30), Toyota Motor (TM 86.08, -0.43), and Thor (THO 37.74, -0.21) all lost between 0.5% and 1.0%.
Restaurant operator Yum! Brands (YUM 67.08, -7.39) also weighed on the discretionary space. The restaurant operator slid 9.9% after issuing full-year 2013 guidance and reaffirming its full-year 2012 earnings growth forecast of at least 13%. The guidance proved to be a point of concern as sales in China are expected to continue tracking lower. Following the update, Raymond James, Susquehanna, and UBS all downgraded the stock.
On the upside, teen retailer Five Below (FIVE 37.15, +5.76) soared 18.4% after beating on earnings and revenue. In addition, the company issued downside fourth quarter earnings guidance while revenue is expected to come in above consensus estimates.
The utilities sector was the top performer and the SPDR Utilities Select Sector ETF (XLU 35.32, +0.37) settled higher by 1.1%. Within the space, electric utilities paced the advance. Duke Energy (DUK 63.82, +1.43) gained 2.3% after reaching settlement with the North Carolina Utilities Commission. The settlement aims to resolve issues following the merger of Duke Energy and Progress Energy. In addition, the company President, Chairman, and Chief Executive Officer Jim Rogers announced his intention to retire by the end of next year. Looking at other utility stocks, Northeast Utilities (NU 38.74, +0.58) and IDACORP (IDA 42.71, +0.47) both advanced near 1.3%.
In economic news, the November Chicago PMI reading of 50.4 surprised to the downside as economists surveyed by Briefing.com had generally expected a reading of 50.7 to follow the prior month's 49.9.
Personal income was unchanged in October, which was below the 0.2% increase expected by the Briefing.com consensus. Personal spending decreased by 0.2%, which was below the expected 0.1% uptick. Core personal consumption expenditures were higher by 0.1%, which fell short of the broadly expected reading of 0.2%.
Monday's economic data will include the November ISM Index as well as October construction spending. The two reports will be released at 10:00 ET. In addition, automakers will report their sales throughout the day.
Week in Review: Equities Eke Out Gains amid Fiscal Cliff Debate
On Monday, equities began the week on a cautious note as uncertainty crept back into the markets. Overseas, the Eurogroup continued to discuss the next tranche of Greek aid. Reports from the talks indicated lawmakers remained split over whether or not haircuts should be applied to the outstanding Greek debt. Additionally, elections in the Spanish region of Catalonia resulted in two-thirds of the vote going to parties which support a referendum on independence. The European news combined with some profit-taking following Friday's rally translated into a downbeat session which saw the S&P 500 slip 0.2%. Retailers succumbed to the broad market pressure, and the SPDR S&P 500 Retail ETF (XRT 63.27, -0.09) slid 1.0%.
Tuesday's session began on a negative note, and the indices finished on their lows. Overnight reports from Europe indicated the International Monetary Fund and the Eurozone finance ministers agreed on the terms of the next installment of Greek aid. As part of the agreement, the country's debt-to-GDP ratio is expected to decline from 190% in 2014 to 124% in 2020. The news did little to inspire investor confidence as the markets doubted the sovereign's ability to reach the lofty goals. Instead, market participants remained focused on Washington where Senator Harry Reid said little progress has been made in budget negotiations. After the Senate majority leader's comments, the S&P 500 fell to session lows from its flat line. The index declined further when a final round of selling pressured it to a loss of 0.5%. Exelon (EXC 30.22, +0.26) gained 0.9% after ISI Group upgraded the stock to ‘buy' from ‘neutral.'
On Wednesday, equities opened lower, but staged a reversal when top lawmakers reiterated their desire to reach a budget agreement. After marking a session low near its 200-day moving average, the S&P 500 reversed 25 handles to session highs. The reversal was aided by comments from House Speaker Boehner who said he is optimistic a deal can be reached in order to avoid going over the fiscal cliff. In addition, the President held a press conference where he reiterated his belief in higher tax rates for top earners. He also stressed that if Congress fails to approve selective tax increases, going over the cliff will result in an across-the-board tax hike. The S&P 500 ended the session with a gain of 0.8%. Green Mountain Coffee Roasters (GMCR 36.67, +0.30) surged 27.3% after reporting strong earnings.
Thursday started on a positive note after Wednesday's comments from House Speaker Boehner were viewed as supportive. However, the Speaker held another press conference on Thursday at which he said no "substantive progress" has been made. The S&P 500 responded to Mr. Boehner's remarks by falling back to its flat line. The weakness did not last long, and the benchmark average was able to regain its losses to close higher by 0.4%. Kohl's (KSS 44.65, -0.37) sank 12.0% after its same store sales declined by 5.6% on expectations of a 2.1% increase.