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Fiscal cliff fears keep Wall Street subdued

Nov 13 2012 07:47
New York - US stocks were little changed in a lightly traded session on Monday, with investors limiting bets ahead of what could be a drawn-out battle over the "fiscal cliff".

Volume was light, with the US bond market and government offices closed for the Veterans Day holiday. Trading was also affected by problems on the NYSE Euronext. The Big Board suspended trading in more than 200 stocks due to problems with a trade-matching engine, though the stocks in question were still active on other exchanges.

Major averages vacillated between modest gains and losses throughout the session.

Worry about the fiscal cliff - a series of budget cuts and tax hikes that will start to go into effect in the new year - has investors cautious because of the potential for harm to US economic growth.

Barclays cut its year-end target for the S&P 500 to 1 325 from 1 395, saying "there is little basis to believe a grand compromise is in the offing".

Though most consider it unlikely that some deal will not be reached, analysts fear going over the cliff could push the economy back into recession. There are also concerns that a protracted debate could hurt business and investment sentiment.

"The concern is there may be an impasse every bit as bad as what we had in August 2011," Brian Gendreau, market strategist with Cetera Financial Group in Gainesville, Florida, said, referring to the last-minute agreement policymakers reached on raising the US debt ceiling.

Last year's political logjam bruised consumer attitudes and led to a downgrade of US debt.

Still, some recent comments from politicians suggest a compromise might be more likely this time, Gendreau said.

NYSE first alerted traders it was having problems with one of its cash equity matching engines at 11:38 and said it would not publish quotes on a total of 216 stocks, including CVS Caremark and Lazard.

Nasdaq OMX Group, BATS Global Markets, and Direct Edge exchanges stopped sending orders to the NYSE, and investors wishing to trade in those shares did so on these exchanges rather than the NYSE. The NYSE said trading in those issues would return to normal on Tuesday.

The S&P index hovered around its 200-day moving average after last week closing below the level for the first time in five months. An extended run under it could signal further losses ahead.

The Dow Jones industrial average slipped 0.23 point to 12 815.16. The Standard & Poor's 500 Index added 0.15 point to 1 380.00. The Nasdaq Composite Index was off 0.62 point to 2 904.25.

The S&P 500 is still up about 10% for 2012, though recent months have eroded those gains. The Nasdaq has fallen for five straight weeks.

Volume was roughly 4.62 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, well below the year-to-date average daily closing volume of 6.52 billion.

Decliners outnumbered advancers on the NYSE 1 539 to 1 406 on the New York Stock Exchange. On the Nasdaq, decliners outpaced advancers by 1 304 to 1 121.

Merger activity bolstered the price of specific stocks. Precision Castparts offered to buy Titanium Metals for $2.9bn, while Leucadia National agreed to buy investment bank Jefferies Group for $3.6bn.  

Shares of Titanium surged 42.6% to $16.50, while Jefferies climbed 14% to $16.27. Precision rose 4.7% to $179.46. In contrast, Leucadia fell 3% to $21.14.

The S&P 500 dropped more than 2% last week, the worst week for the benchmark index since June. The drop was partly propelled by concerns about whether there will be a timely solution to avoid the fiscal cliff.

Gilead Sciences supported the Nasdaq after the company reported over the weekend a 100% cure rate using a combination of drugs in a small number of patients with the most common and hardest to treat form of hepatitis C. Gilead was up 13.7% at $73.93.

Also in the biotech sector, Celgene rose 5.8% to $75.66 after a late-stage clinical trial showed its drug Abraxane improved survival in patients with pancreatic cancer.
wall street  |  international markets


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