Wall Street drops in thin session, led by retailers

NEW YORK (Reuters) - Stocks fell for a third straight day on Wednesday, dragged lower by retail stocks after a report showed consumers spent less in the holiday shopping season than last year.

Trading was light, with volume at a mere 4.01 billion shares traded on the New York Stock Exchange, the Nasdaq and NYSE MKT, well below the daily average so far this year of about 6.48 billion shares. The day's volume was the lightest full day of trading so far in 2012. Many senior traders were still on vacation during this holiday-shortened week and major European markets were closed for the day.

Many investors said concerns about the "fiscal cliff" kept shoppers away from stores, suggesting markets may struggle to gain any ground until that issue is resolved. The CBOE Volatility Index <.vix> or VIX, Wall Street's favorite barometer of investor anxiety, rose 4.46 percent, closing above 19 for the first time since November 7.

A number of 2012's strongest performers advanced, a sign that portfolio managers may be engaging in "window dressing," a practice where market participants buy securities with big gains to improve the appearance of their holdings before presenting the results to clients. Bank of America Corp , which has more than doubled in 2012, added 2.6 percent to $11.54 on Wednesday.

Holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year, according to data from MasterCard Advisors SpendingPulse. The Morgan Stanley retail index <.mvr> skidded 1.8 percent while the SPDR S&P Retail Trust slipped 1.7 percent.

"With the 'fiscal cliff' hanging over our heads, it was hard to convince people to shop, and now it's hard to convince investors that there's any reason to buy going into year-end," said Rick Fier, director of trading at Conifer Securities in New York, which has about $12 billion in assets under administration.

President Barack Obama is due back in Washington early Thursday for a final effort to negotiate a deal with Congress to bridge a series of tax increases and government spending cuts set to begin next week, the so-called "fiscal cliff" many economists worry could push the U.S. economy into recession if it takes effect.

Coach Inc fell 5.9 percent to $54.13 as the S&P 500's biggest decliner, followed by Amazon.com , down 3.9 percent at $248.63, and Abercrombie & Fitch , off 3.5 percent at $45.44. Ralph Lauren Corp , Limited Brands and Gap Inc also ranked among the S&P 500's biggest decliners.

The Dow Jones industrial average <.dji> slipped 24.49 points, or 0.19 percent, to 13,114.59 at the close. The Standard & Poor's 500 Index <.spx> shed 6.83 points, or 0.48 percent, to 1,419.83. The Nasdaq Composite Index <.ixic> dropped 22.44 points, or 0.74 percent, to 2,990.16.

J.C. Penney Co was a notable exception to the weakness in retail stocks, surging 4.4 percent to $20.75 as the S&P 500's biggest gainer. It was followed closely by Bank of America and Genworth Financial , which each gained nearly 3 percent for the day.

"People want to show they own names like these, making them prime 'window dressing' candidates," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.

"Bank of America keeps going up even though it's overbought and you'd expect a pullback at these levels. No one wanted it when it was under $10 a share, but they want it now."

The S&P 500 has fallen 1.5 percent over the past three sessions, the worst three-day decline since mid-November. The Dow Jones Transportation Average <.djt>, viewed as a proxy for business activity, fell 0.6 percent.

A Republican plan that failed to gain traction last week triggered the S&P 500's recent drop, highlighting the market's sensitivity to headlines centered on the budget talks.

During the last five trading days of the year and the first two of next year, it's possible for a "Santa rally" to occur. Since 1928, the S&P 500 has averaged a gain of 1.8 percent during that period and risen 79 percent of the time, according to data from PrinceRidge.

"While it's unlikely there could be a budget deal at any time, no one wants to get in front of that trade," said Conifer's Fier. "Investors can easily make up for any gains when there's more action in 2013."

Data showed U.S. single-family home prices rose in October, reinforcing the view that the domestic real estate market is improving, as the S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.7 percent in October on a seasonally adjusted basis.

Decliners outnumbered advancers on the New York Stock Exchange by a ratio of about 2 to 1, while on the Nasdaq, more than five stocks fell for every three that rose.

(Editing by Jan Paschal)

Read More..

Yen falls as Japan forms new government, supporting Nikkei

TOKYO (Reuters) - Expectations that Japan's incoming prime minister will pursue drastic stimulus policies to drive the country's economy out of deflation helped weaken the yen and underpinned the Nikkei on Wednesday, while Asian shares were capped in thin holiday trade.

Singapore <.ftsti>, Malaysia <.klse>, Indonesia <.jkse>, the Philippines <.psi> and South Korea <.ks11> were closed on Tuesday for the Christmas holiday, reopening on Wednesday.

Hong Kong and Australia remain closed on Wednesday.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> inched up 0.1 percent, after rising 0.3 percent the previous day on the back of a surge in Shanghai shares <.ssec> to five-month highs and a jump in Taiwan shares <.twii>.

Shinzo Abe, who won a landslide victory in an election earlier this month, will be sworn in as premier on Wednesday, when he is also expected to appoint his cabinet. He is prescribing a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and rein in the strong yen.

He has kept up pressure on the Bank of Japan to deliver much stronger monetary easing policies and called for a 2 percent inflation target to beat deep-rooted deflation, pushing the yen to a 20-month low of 85.08 yen on trading platform EBS early on Wednesday.

Minutes of the BOJ's policy-setting meeting in November showed on Wednesday that some board members said the central bank must act decisively, without ruling out any policy options, if the outlook for the economy and prices worsens further.

Japan's Nikkei stock average <.n225> opened up 0.5 percent, after recapturing the key 10,000 mark it ceded on Friday and ending up 1.4 percent. <.t/>

"The market is overbought, so the Nikkei may not rise sharply, but 'Abe trades' may invite some buying," said Hiroichi Nishi, general manager at SMBC Nikko Securities, adding that if the dollar trades above 85 yen, investors are likely to chase the Nikkei higher to near 10,200.

Aside from the Japanese factor, the dollar was also expected to stay firm this week as investors repatriate dollars, and as the U.S. fiscal impasse is likely to continue to sap investor appetite for risky assets and raise the dollar's safe-haven appeal.

U.S. lawmakers and President Barack Obama were on Christmas holiday and talks were unlikely to resume until later in the week.

House of Representatives Speaker John Boehner failed to gain support for a tax plan at the end of last week, raising fears that the United States may face the "fiscal cliff" of some $600 billion in automatic spending cuts and tax increases set to start on January 1.

"With the exception of the U.S. fiscal talks, there is no particular issue that could dampen investor appetite to any great degree," said Lee Kyung-min, an analyst at Woori Investment & Securities.

Activity is likely to remain subdued, with volume low and without major economic news.

Later in the session, Thailand will release trade data, which is expected to show exports in November posting very high annual growth as a result of low levels last year reflecting the damage from the flooding.

South Korea's key consumer sentiment index held steady in December from November and stood below the neutral point for a fifth consecutive month, the central bank said on Wednesday, diminishing hopes of a quick economic rebound.

(Additional reporting by Ayai Tomisawa in Tokyo and Joyce Lee in Seoul; Editing by Daniel Magnowski)

Read More..

Start of "Santa Claus rally" dampened by "cliff' worries

NEW YORK (Reuters) - U.S. stocks edged lower on Monday as caution over the potential for volatility driven by worries about the U.S. "fiscal cliff" dampened enthusiasm at the start of a seasonally strong period for equities.

Investors are betting Congress will reach a deal to avert most of the austerity measures due to come into force at the start of next year. That has led to the best year for stocks since the post-financial crisis rebound. But those gains may be quickly reversed if a deal is not reached soon.

The S&P 500 index posted its biggest drop in more than a month on Friday as a Republican plan to avoid the cliff - $600 billion in tax hikes and spending cuts that could tip the U.S. economy into recession - failed to gain traction on Thursday night.

Sharp moves like that highlight how headlines from Washington can whipsaw markets, especially during the thinly traded period over the Christmas holiday.

Still, with the S&P 500 up 0.7 percent in December and on course for its strongest month since September, some analysts are predicting that stocks will find their footing during a market seasonality known as the "Santa Claus rally."

"Right now we've seen some very constructive action in the market so I think that bodes well for this being a positive seasonal 'Santa' period over the coming seven days," said Ari Wald, a technical analyst at The PrinceRidge Group.

He noted an all-time high in the NYSE advance-decline line, which compares advancing and declining stocks, as indication of strong participation in the rally off November lows.

"Pull-backs are buying opportunities," said Wald. "There has been really great participation on this move, a lot of small- and mid-cap stocks behaving well, pushing out to the upside; we're seeing some good leadership from offensive sectors of the market as well."

A high ratio of advancing stocks to declining issues shows there is broad participation across the equity market.

The Santa seasonality covers the last five trading days of the year and the first two of the new year. Since 1928, the S&P 500 has averaged a gain of 1.8 percent during this period and risen 79 percent of the time, according to data from PrinceRidge.

The Dow Jones industrial average <.dji> dropped 51.76 points, or 0.39 percent, to 13,139.08. The Standard & Poor's 500 Index <.spx> fell 3.49 points, or 0.24 percent, to 1,426.66. The Nasdaq Composite Index <.ixic> lost 8.41 points, or 0.28 percent, to 3,012.60.

The S&P 500 is up more than 13 percent for the year, having recovered nearly all the losses suffered in the wake of the U.S. election. The yearly gain would be the best since 2009.

Some U.S. lawmakers expressed concern on Sunday the country would go over the cliff, as some Republicans charged that was President Barack Obama's goal. Talks are stalled with Obama and House of Representatives Speaker John Boehner out of Washington for the holidays.

"It does seem like we are continuing through the same drift of the same thing we've had the past couple of weeks - 'cliff' talk," said Nick Scheumann, wealth partner at Hefty Wealth Partners in Auburn, Indiana.

"You can't trade on what you don't know and we truly don't know what they are going to do," he said.

Congress is expected to return to Washington next Thursday as President Barack Obama returns from a trip to Hawaii. As the deadline draws closer, a 'stop-gap' deal appears to be the most likely outcome of any talks.

Trading volume was muted, with U.S. equity markets closing at 1 p.m. (1800 GMT) ahead of the Christmas Day holiday on Tuesday.

In addition, a number of European markets operated on a shortened session, with other markets closed.

U.S. retailers may not see a sales surge from this weekend as ho-hum discounts and fears about imminent tax hikes and cuts in government spending give Americans fewer reasons to open their wallets in the last few days before Christmas.

Aegerion Pharmaceuticals Inc said the U.S. Food and Drug Administration approved Juxtapid capsules in patients with homozygous familial hypercholesterolemia, but will conduct a post-approval study to test long-term safety and efficacy. Shares fell 1.8 percent to $25.25.

Herbalife Ltd dipped 4.4 percent to $26.06 after the company said it expects to exceed its previously announced repurchase authorization guidance and has retained Moelis & Company as its strategic adviser. The declines put the stock on track for a ninth straight decline.

Yum Brands Inc advanced 1.8 percent to $65.01 after Shanghai's food safety authority said the level of antibiotics and steroids in the company's KFC chicken was within official limits.

(Reporting By Edward Krudy; Editing by Chizu Nomiyama and Dan Grebler)

Read More..

Asian shares steady, U.S. budget concerns weigh

TOKYO (Reuters) - Asian shares steadied in quiet pre-holiday trade after a slump late last week, with markets cautious over whether the United States can avoid a fiscal crisis.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was up 0.6 percent after falling to a near two-week low on Friday when House of Representatives Speak John Boehner failed to gain support for a tax plan, raising fears the U.S. may not be able to avert the "fiscal cliff" of automatic spending cuts and tax increases set to start January 1.

The White House on Friday tried to rescue stalled talks but there was little headway as lawmakers and President Barack Obama abandoned Washington for Christmas.

Many market players still expect both sides to reach a compromise before the end-year deadline but heightening tensions were likely to stifle trade already slowed by the holidays.

U.S. Treasuries gained a safety bid on Friday from fiscal cliff worries, which put many investors on edge and drove down global equities markets, the euro and oil futures.

Australian shares <.axjo> rose 0.4 percent early on Monday, but trade was extremely thin, with Monday's session shortened ahead of the two-day Christmas holiday and many players already out on vacation.

South Korean shares opened up 0.2 percent.

"Investors will cut positions in response to the U.S. budget uncertainty, as the year-end deadline for a fiscal deal is just around the corner," said Lee Jae-hoon, an analyst at Mirae Asset Securities.

"A last-minute agreement, if it is reached, will be cheered by investors. But the deal looks ... difficult," Lee said.

Japanese financial markets are closed for a public holiday and will resume trading on Tuesday. Japan's Nikkei average <.n225> dropped 1 percent on Friday to close below the key 10,000-mark it reclaimed for the first time since early April on December 19. <.t/>

The dollar inched up 0.2 percent to 84.43 yen, having fallen below 84 yen on Friday. The dollar hit a 20-month high of 84.62 yen on December 19.

The yen has been pressured by expectations the Bank of Japan will be pressured to adopt more drastic monetary stimulus measures next year as incoming prime minister Shinzo Abe has demanded bolder action by the central bank to bring Japan out of decades-long deflation.

Currency speculators increased their bets against the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. Bets against the yen fell after reaching a more than five-year peak.

The euro stood steady around $1.3184.

In Italy, Mario Monti announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms. Monti resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.

At stake is the leadership of the world's eighth largest economy, where recession and public debt of more than 2 trillion ($2.6 billion) have aggravated investor concerns about growth and stability in the euro zone.

Italy faces a huge bond redemption in the first quarter of 2013 and its failure to secure funding could refuel concerns about sovereign financing not only in Italy but also similarly indebted Spain, hurting sentiment towards the euro.

(Additional reporting by Hyunjoo Jin in Seoul)

Read More..

Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas"

NEW YORK (Reuters) - Wall Street traders are going to have to pack their tablets and work computers in their holiday luggage after all.

A traditionally quiet week could become hellish for traders as politicians in Washington are likely to fall short of an agreement to deal with $600 billion in tax hikes and spending cuts due to kick in early next year. Many economists forecast that this "fiscal cliff" will push the economy into recession.

Thursday's debacle in the U.S. House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013.

Still, the market remains resilient. Friday's decline on Wall Street, triggered by Boehner's fiasco, was not enough to prevent the S&P 500 from posting its best week in four.

"The markets have been sort of taking this in stride," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago, which has about $38 billion in assets under management.

"The markets still basically believe that something will be done," he said.

If something happens next week, it will come in a short time frame. Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will close on Tuesday for Christmas. Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the rest of the week with scores of market participants away on a holiday break.

For the week, the three major U.S. stock indexes posted gains, with the Dow Jones industrial average <.dji> up 0.4 percent, the S&P 500 <.spx> up 1.2 percent and the Nasdaq Composite Index <.ixic> up 1.7 percent.

Stocks also have booked solid gains for the year so far, with just five trading sessions left in 2012: The Dow has advanced 8 percent, while the S&P 500 has climbed 13.7 percent and the Nasdaq has jumped 16 percent.

IT COULD GET A LITTLE CRAZY

Equity volumes are expected to fall sharply next week. Last year, daily volume on each of the last five trading days dropped on average by about 49 percent, compared with the rest of 2011 - to just over 4 billion shares a day exchanging hands on the New York Stock Exchange, the Nasdaq and NYSE MKT in the final five sessions of the year from a 2011 daily average of 7.9 billion.

If the trend repeats, low volumes could generate a spike in volatility as traders keep track of any advance in the cliff talks in Washington.

"I'm guessing it's going to be a low volume week. There's not a whole lot other than the fiscal cliff that is going to continue to take the headlines," said Joe Bell, senior equity analyst at Schaeffer's Investment Research, in Cincinnati.

"A lot of people already have a foot out the door, and with the possibility of some market-moving news, you get the possibility of increased volatility."

Economic data would have to be way off the mark to move markets next week. But if the recent trend of better-than-expected economic data holds, stocks will have strong fundamental support that could prevent selling from getting overextended even as the fiscal cliff negotiations grind along.

Small and mid-cap stocks have outperformed their larger peers in the last couple of months, indicating a shift in investor sentiment toward the U.S. economy. The S&P MidCap 400 Index <.mid> overcame a technical level by confirming its close above 1,000 for a second week.

"We view the outperformance of the mid-caps and the break of that level as a strong sign for the overall market," Schaeffer's Bell said.

"Whenever you have flight to risk, it shows investors are beginning to have more of a risk appetite."

Evidence of that shift could be a spike in shares in the defense sector, expected to take a hit as defense spending is a key component of the budget talks.

The PHLX defense sector index <.dfx> hit a historic high on Thursday, and far outperformed the market on Friday with a dip of just 0.26 percent, while the three major U.S. stock indexes finished the day down about 1 percent.

Following a half-day on Wall Street on Monday ahead of the Christmas holiday, Wednesday will bring the S&P/Case-Shiller Home Price Index. It is expected to show a ninth-straight month of gains.

U.S. jobless claims on Thursday are seen roughly in line with the previous week's level, with the forecast at 360,000 new filings for unemployment insurance, compared with the previous week's 361,000.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: rodrigo.campos(at)thomsonreuters.com)

(Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

Read More..

Wall Street ends lower after "fiscal cliff" setback

NEW YORK (Reuters) - U.S. stocks finished lower on Friday after a Republican plan to avoid the "fiscal cliff" failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013.

Still, stocks managed to rebound from the day's lows near the end of the session, and for the week, the three major U.S. stock indexes still ended higher, with the S&P 500 gaining 1.2 percent.

Trading was volatile because of waning confidence in the prospect of a deal out of Washington, and in part, as the result of the quarterly expiration of options and futures contracts. The CBOE Volatility Index <.vix> or VIX, the market's favorite barometer of investor anxiety, finished below its session high.

Republican House Speaker John Boehner failed to garner enough votes from even his own party to pass his "Plan B" tax bill late on Thursday. It was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession.

"The failure with Plan B was disappointing, if not terribly surprising, but now there's a real lack of clarity about what will happen, and markets hate that," said Mike Hennessy, managing director of investments for Morgan Creek in Chapel Hill, North Carolina.

The Dow Jones industrial average <.dji> dropped 120.88 points, or 0.91 percent, to 13,190.84 at the close. The Standard & Poor's 500 Index <.spx> fell 13.54 points, or 0.94 percent, to 1,430.15. The Nasdaq Composite Index <.ixic> lost 29.38 points, or 0.96 percent, to 3,021.01.

"Amazingly, this sharp decline today may not actually change the technical picture much - unless the decline gets worse," said Larry McMillan, president of options research firm McMillan Analysis Corp, in a research note.

For the week, the Dow gained 0.4 percent and the Nasdaq climbed 1.7 percent.

On Friday, Herbalife dropped for an eighth straight session. Investor Bill Ackman recently ramped up his campaign against the company. The stock skidded 19.2 percent to $27.27 and has lost more than 35 percent this week.

Plan B, which called for tax increases on those who earn $1 million or more a year, was not going to pass the Democratic-led Senate or win acceptance from the White House anyway. But it exposed the reality that it will be difficult to get Republican support for the more expansive tax increases that President Barack Obama has urged.

Still, the declines of about 1 percent in the three major U.S. stock indexes suggest that investors do not believe the economy will be unduly damaged by the absence of a deal, said Mark Lehmann, president of JMP Securities, in San Francisco.

"You could have easily woken up today and seen the market down 300 or 400 points, and everyone would have said, 'That's telling you this is really dire,'" Lehmann said.

"I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don't think we're going to get there."

Banking shares, which outperform during economic expansion and have led the market on signs of progress on resolving the fiscal impasse, led Friday's declines. Citigroup Inc fell 1.7 percent to $39.49, while Bank of America slid 2 percent to $11.29. The KBW Banks index <.bkx> lost 1.19 percent.

Volatility on Friday was exacerbated in part by "quadruple witching," the quarterly expiration of stock index futures and options, stock options and single stock futures contracts.

About 8.59 billion shares changed hands on major U.S. exchanges, more than the daily average of 6.47 billion daily in 2012, in part because of the "quadruple witching" expiration.

The day's round of data indicated the economy was surprisingly resilient in November; consumer spending rose by the most in three years and a gauge of business investment jumped.

But separate data showed consumer sentiment slumped in December. The S&P Retail Index <.spxrt> fell 1.2 percent.

U.S.-listed shares of Research in Motion sank 22.7 percent to $10.91 after the Canadian company, known as the BlackBerry maker, reported its first-ever decline in its subscriber numbers on Thursday alongside a new fee structure for its high-margin services segment.

(Additional reporting by Ryan Vlastelica and Leah Schnurr; Editing by Bernadette Baum, Nick Zieminski and Jan Paschal)

Read More..

Wall Street bounces back on hope for "cliff' solution

NEW YORK (Reuters) - U.S. stocks rebounded from early losses on Thursday after Republican House Speaker John Boehner said he would keep working on a solution to the "fiscal cliff" while also slamming President Barack Obama's approach to budget talks.

NYSE Euronext was the S&P 500's biggest gainer, surging 34 percent to $32.25 after IntercontinentalExchange Inc said it would buy the operator of the New York Stock Exchange for $8.2 billion.

ICE shares shot up 1.4 percent to $130.10.

Republicans in the U.S. House of Representatives pushed ahead with their own plan to avoid a series of steep tax hikes and spending cuts due in early 2013, complicating negotiations with the White House. Obama has vowed to veto the plan.

Investors have hoped for an agreement soon between policymakers, but progress has been slow. Boehner said he expected to continue to work with Obama, but repeated his charge that the president and Senate Democrats were trying to "slow walk" the country over the fiscal cliff.

"Speaker Boehner went on the air and basically told us he doesn't like what the president's doing or not doing, and the markets rallied on that, which was kind of weird," said Stephen Guilfoyle, a trader at Meridian Equity Partners, in New York.

The Dow Jones industrial average <.dji> gained 59.75 points, or 0.45 percent, to 13,311.72 at the close. The S&P 500 <.spx> rose 7.88 points, or 0.55 percent, to 1,443.69. The Nasdaq Composite <.ixic> climbed 6.02 points, or 0.20 percent, to 3,050.39.

Stocks rallied earlier in the week on signs of progress in the fiscal cliff negotiations. But with the S&P 500 up 14.8 percent so far this year, investors are taking the opportunity to engage in some hedging as 2012 comes to a close.

Herbalife lost 9.6 percent to $33.74 following news that hedge fund manager Bill Ackman was betting against the company as part of his big end-of-the-year short.

The S&P Financial Index <.gspf> gained 1.4 percent.

The U.S. economy grew 3.1 percent in the third quarter, faster than previously estimated, while the number of Americans filing new claims for jobless benefits rose more than expected in the latest week.

Existing home sales jumped 5.9 percent in November, more than expected, and by the fastest monthly pace in three years. An index of housing shares <.hgx> gained 0.78 percent.

But KB Home slid 6.4 percent to $15.60 as the company reported higher homebuilding costs and expenses in the fourth quarter.

About 6.4 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, roughly in line with the daily average so far this year of about 6.46 billion shares.

On the NYSE, advancers outnumbered decliners by a ratio of about 2 to 1. On the Nasdaq, five stocks rose for every three that fell.

(Additional reporting by Ryan Vlastelica and Leah Schnurr; Editing by Jan Paschal)

Read More..

Wall Street falls as "cliff" talks sour, but hopes remain

NEW YORK (Reuters) - U.S. stocks sold off late in the day to close at session lows on Wednesday as talks to avert a year-end fiscal crisis turned sour, even as investors still expect a deal.

The S&P 500 slipped after a two-day rally that took the benchmark index to its highest close in two months. Defensive-oriented shares led the decliners, including health care and consumer staples.

General Motors bucked the overall weakness to surge 6.6 percent to $27.18 after the automaker said it will buy back 200 million of its shares from the U.S. Treasury, which plans to sell the rest of its GM stake over the next 15 months.

President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could send the U.S. economy into recession.

House Speaker John Boehner, the top Republican in Congress, said in a one-minute press conference that his chamber will pass a proposal that Obama had already threatened to veto as it spares many wealthy Americans from tax hikes needed to balance the budget. Obama has already agreed to reductions in benefits for senior citizens.

"My guess is they're close to a deal, and right before, it looks like the deal is about to blow up either on manufactured or legitimate reasons," said Uri Landesman, president of hedge fund Platinum Partners in New York.

He said if the market thought a deal was in real danger, the S&P 500 would slide below 1,400. It stands now near 1,435, not far from a two-month high.

The CBOE Volatility Index <.vix> surged 11.5 percent to 17.36, but has remained relatively stable. Its 14- 50- and 200-day averages are all within 1.1 points.

Landesman said the VIX's stability indicates "the bulls have control of this market still."

Banks and energy shares - groups that outperform during periods of economic expansion - have led recent gains, indicating a shift to focusing on a growing economy as Wall Street looks past the budget talks.

Defensive sectors led Wednesday's downturn, with the S&P health care sector index <.gspa> down 1.1 percent.

The Dow Jones industrial average <.dji> dropped 98.99 points, or 0.74 percent, to 13,251.97. The S&P 500 <.spx> lost 10.98 points, or 0.76 percent, to 1,435.81. The Nasdaq Composite <.ixic> fell 10.17 points, or 0.33 percent, to 3,044.36.

Herbalife Ltd shares tumbled 12.1 percent to $37.34 after William Ackman, one of the world's biggest hedge fund managers, said he is shorting the stock of the weight management products company.

Oracle shares helped cap the Nasdaq's loss after the company reported earnings that beat expectations on strong software sales growth. Oracle jumped 3.7 percent to $34.09.

Knight Capital Group Inc climbed 5.4 percent to $3.51 after it agreed to be bought by Getco Holdings in a deal valued at $1.4 billion. The stock, which nearly collapsed after a trading error in August, remains down about 70 percent so far this year.

Shares of Chinese display advertising provider Focus Media Holding Ltd jumped 6.7 percent to $25.52 after it agreed to be bought by a consortium of private equity funds led by the Carlyle Group for about $3.6 billion.

Data showed homebuilding permits touched their highest level in nearly 4-1/2 years in November. The PHLX housing index <.hgx> fell 0.8 percent, but has gained 66.4 percent this year as the housing market has turned the corner.

About 6.9 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly above the daily average so far this year of about 6.45 billion shares.

Advancing and declining issues were almost even on both the NYSE and the Nasdaq.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

Read More..

Shares, euro up on hopes of U.S. "cliff" deal, BOJ easing

SINGAPORE (Reuters) - Asian shares rose and the euro hovered around multi-month highs on Wednesday as signs of progress in resolving the U.S. "fiscal cliff" budget crisis boosted demand for riskier assets.

Expectations of more aggressive monetary easing under Japan's new government also drove stocks higher, with the Bank of Japan (BOJ) starting a two day meeting on Wednesday.

The BOJ will ease monetary policy this week and consider adopting a 2 percent inflation target in January, double its current price goal, sources say, after pressure from next Prime Minister Shinzo Abe for stronger efforts to beat deflation.

Tokyo's Nikkei share average <.n225> opened up more than 1 percent, topping 10,000 points for the first time since April.

"The market is already in overbought territory, but investors are increasingly being alarmed that there is a risk of not having Japanese stocks in their portfolios," said Hiroichi Nishi, general manager at SMBC Nikko Securities.

Australian shares <.axjo> rose 0.6 percent to a new 17-month high, lead by miners and banks. MSCI's broadest index of Asia Pacific shares outside Japan <.miapj0000pus> edged up 0.1 percent. <.t/>

On Wall Street the S&P 500 <.spx> rose more than 1 percent on Tuesday to notch up the index's best two-day run in a month, on growing confidence a deal can be reached to avoid a U.S. fiscal cliff of spending cuts and tax rises in January. <.n/>

The euro was steady around $1.3226, just shy of its highest since May, and against the yen it fetched 111.53, having risen as far as 111.60, its highest since late August 2011.

"Unless U.S. fiscal cliff talks take an unexpected turn for the worse, we believe that EUR/USD will meet our 1.3300 year-end target," analysts at BNP Paribas wrote in a note.

The greater appetite for riskier assets also supported oil, with U.S. benchmark crude edging up to $88 a barrel.

(Additional reporting by Ayai Tomisawa in Tokyo and Ian Chua in Sydney: Editing by Michael Perry)

Read More..

Optimism about "cliff" boost market; financials lead

NEW YORK (Reuters) - The S&P 500 ended at its highest level in almost two months on Monday on rising hopes that negotiations over the "fiscal cliff" were making progress and that a deal could be reached in days.

After weeks of stalemate, President Barack Obama and Republican House Speaker John Boehner met at the White House on Monday, raising hopes that Washington will be able to head off steep tax hikes and spending cuts that threaten the economy.

All of the S&P 500's 10 sectors were higher, led by financials and other growth-oriented sectors. The S&P Financial Index <.gspf> gained 2.1 percent, and shares of Bank of America jumped 4 percent to $11. In a research note Monday, Meredith Whitney Advisory Group shifted to a positive stance on financials and upgraded Bank of America, Citigroup and Discover Financial shares.

The S&P consumer distretionary index <.gspd>, up 1.8 percent, was the second-best performing sector. Investors worry the U.S. economy could slide into recession if the tax and spending changes are implemented.

Boehner has edged closer to Obama's position by proposing to extend lower tax rates for everyone who earns less than $1 million. Still, his position remains far from that of President Obama.

"Trumping everything right now are the fiscal cliff talks. It seems like progress is being made. I think it's getting to the nitty gritty," said Alan Lancz, president of Alan B. Lancz & Associates Inc. in Toledo, Ohio. "The bet right now is that something will come by the end of this week."

The Dow Jones industrial average <.dji> was up 100.38 points, or 0.76 percent, at 13,235.39. The Standard & Poor's 500 Index <.spx> was up 16.78 points, or 1.19 percent, at 1,430.36, its highest close since October 22. The Nasdaq Composite Index <.ixic> was up 39.27 points, or 1.32 percent, at 3,010.60.

The gains, which came on lighter-than-usual volume, ended a two-day losing streak on the S&P 500. The index also had its best daily percentage gain since November 23. Volume was roughly 6.2 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of 6.4 billion.

In the financial sector, American International Group Inc. shares rose 3 percent to $34.95 on plans to sell as much as $6.5 billion of AIA Group Ltd. Advancing stocks also included those in the home construction sector <.djushb>, which rose 4.5 percent.

"People are looking for sectors to play, and I think Bank of America broke out of some long-standing price levels, and it got everything going in that sector," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Shares of Citigroup were up 4.1 percent at $39.15 while shares of Discover Financial were up 1.6 percent at $40.18.

Clearwire Corp agreed to sell the rest of the company to Sprint Nextel Corp for a slightly sweetened $2.2 billion offer just days after minority shareholders criticized the previous bid as too low. Clearwire tumbled 13.6 percent to $2.91, while Sprint was up 0.2 percent to $5.56.

Apple Inc shares edged up after recent losses, rising 1.8 percent to $518.83 even though two firms cut their price targets on the stock Monday.

The tech giant said it sold more than 2 million of its new iPhone 5 smartphones in China during the three days after its launch there on Friday, but the figures did not ease worries about stiffer competition. Apple shares have tumbled more than 25 percent in about three months.

Compuware Corp rose 12.9 percent to $10.76 after hedge fund Elliott Management offered to buy the business software maker for $2.3 billion and S&P Capital IQ raised the target price and moved it to "hold" from "strong sell.

Advancers outnumbered decliners on the NYSE by about 2 to 1, and on the Nasdaq by nearly 9 to 4.

(Editing by Kenneth Barry and Nick Zieminski)

Read More..

Wall Street Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

Read More..

Wall Street Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

Read More..

Wall St Week Ahead: Holiday "on standby" as clock ticks on cliff

NEW YORK (Reuters) - The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff."

Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.

"A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

"Next week is going to be a Capitol Hill-driven market."

With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1.

Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season.

"It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said.

"We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something."

Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent.

BEWARE OF THE WITCH

This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile.

"We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said.

RETHINKING APPLE

Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31.

Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple . Apple's stock has lost a quarter of its value since it hit a lifetime high of $705.07 on September 21.

On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year.

"If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said.

But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high.

(Reporting by Angela Moon; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

Read More..

S&P 500 ends six-day winning streak on "cliff" anxiety

NEW YORK (Reuters) - The S&P 500 ended its six-day winning streak on Thursday, retreating as worries intensified that Washington's "fiscal cliff" negotiations were dragging on with little progress.

Anxiety about the drawn-out talks between Democrats and Republicans was enough to offset encouraging data on retail sales and jobless claims on Thursday.

There is concern that tax hikes and spending cuts, set to begin in 2013 if a deal is not reached in Washington, will hurt growth. The stock market has taken the heated rhetoric in stride of late, but downbeat remarks from Republican House Speaker John Boehner prompted some selling on Thursday.

Boehner accused President Barack Obama of "slow walking" the economy off the fiscal cliff. He is scheduled to meet with Obama later on Thursday.

"There is no conviction here and Boehner's comments - as harsh as they were - were realistic," said Jason Weisberg, managing director at Seaport Securities Corp., in New York.

"The fiscal cliff is already built in. That being said, people don't like to be told the apocalypse is coming over and over and over again. The real players in this market have already closed their books."

After coming close to a 1 percent decline for the day, the S&P 500 pared losses late in the session. The index had posted six straight sessions of gains through Wednesday's close, and at one point on Wednesday, the S&P touched its highest intraday level since October 22.

While the Federal Reserve's announcement on Wednesday of a new round of economic stimulus bolstered stocks, Chairman Ben Bernanke's comments that monetary policy would not be sufficient to offset the impact of the fiscal cliff weighed on sentiment.

Apple's stock , down 1.7 percent at $529.69, was among the biggest drags on the Nasdaq in Thursday's session, while International Business Machines , down 0.5 percent at $191.99, was among the biggest weights on the Dow. A U.S. jury found that Apple's iPhone infringed three patents owned by MobileMedia Ideas.

Among the day's biggest gainers, Best Buy Co shares shot up 15.9 percent to $14.12 after a report that the company's founder is expected to offer to buy the consumer electronics retailer by the end of the week.

The Dow Jones industrial average <.dji> tumbled 74.73 points, or 0.56 percent, to 13,170.72 at the close. The Standard & Poor's 500 Index <.spx> fell 9.03 points, or 0.63 percent, to 1,419.45. The Nasdaq Composite Index <.ixic> slid 21.65 points, or 0.72 percent, to end at 2,992.16.

Energy and information technology sectors were the S&P 500's weakest performers, with the S&P energy index <.gspe> down 0.9 percent.

In the energy sector, shares of Nabors Industries Ltd dropped 4.7 percent to $13.85 after Jefferies cut the drilling company's rating. Shares of U.S. refining company Phillips 66 lost 1.6 percent to $52.21.

The day's economic data sent some positive signals on the economy, with weekly claims for jobless benefits dropping to nearly the lowest level since February 2008, and retail sales rising in November after an October decline, improving the picture for consumer spending.

In Europe, European Union finance ministers reached agreement to make the European Central Bank the bloc's top banking supervisor, which could boost confidence in EU leaders' ability to confront the euro zone's sovereign debt crisis.

After the bell, shares of Adobe Systems Inc rose 5.8 percent to $37.60 after the maker of Photoshop and Acrobat software posted a better-than-expected fourth-quarter profit. The stock ended the regular session at $35.53, down 1.2 percent.

Volume was roughly 6.16 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of 6.52 billion.

Decliners outnumbered advancers on the NYSE by a ratio of about 7 to 3, and on the Nasdaq, more than five stocks fell for every three that rose.

(Reporting by Caroline Valetkevitch; Additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry and Jan Paschal)

Read More..

Wall Street ends almost flat as Bernanke warns on "cliff"

NEW YORK (Reuters) - Stocks ended nearly flat on Wednesday, giving up most of the day's gains after Fed Chairman Ben Bernanke reiterated that monetary policy won't be enough to offset damage from the "fiscal cliff."

His comments followed the Federal Reserve's announcement of a new stimulus plan, which briefly pushed the S&P 500 to a seven-week high.

The plan, the latest attempt to boost the country's struggling economy, will replace a more modest program set to expire with a fresh round of Treasury purchases that will increase its balance sheet. The program is known as "quantitative easing" or QE.

In comments after the announcement, Bernanke said he hopes that markets won't have to tank to get a fiscal cliff deal.

"Initially the addition of QE was certainly favorable. I think, though, in the press conference, what came out is that there still seems to be a level of uncertainty with regard to the exit strategy (and) the efficacy of the current policy," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

Bernanke "reiterated the fact that monetary policy has its hands tied as far as addressing the seriousness of going over the fiscal cliff," Hellwig added.

The S&P financial sector index <.gspf>, which had been up more than 1 percent after the Fed's announcement, ended up just 0.5 percent.

Wal-Mart Stores Inc's stock was the biggest drag on the Dow, falling 2.8 percent to $68.94 following the Indian government's announcement of an inquiry into the company's lobbying practices.

The Dow Jones industrial average <.dji> slipped 2.99 points, or 0.02 percent, to 13,245.45 at the close. The Standard & Poor's 500 Index <.spx> inched up just 0.64 of a point, or 0.04 percent, to 1,428.48. But the Nasdaq Composite Index <.ixic> shed 8.49 points, or 0.28 percent, to end at 3,013.81.

Though the S&P 500 ended up just slightly, it was the sixth day of gains for the index - its longest winning streak since August.

The central bank committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September. It also said it will keep its near-zero interest-rate program in place until the U.S. unemployment rate falls to 6.5 percent from its current 7.7 percent.

"The actions by the Fed were more aggressive than investors anticipated," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

"The asset-purchasing program is probably larger and more comprehensive than some might have thought."

Negotiations over plans to avoid the fiscal cliff intensified in Washington, but U.S. House of Representatives Speaker John Boehner said on Wednesday that "serious differences" remain with President Barack Obama in their talks. If no agreement is reached, steep tax hikes and budget cuts will fall into place early next year.

Shares of Aetna , the third-largest U.S. health insurer, gained 3.2 percent to $45.91, a day after the company gave a higher forecast for profit and revenue growth in 2013.

Volume was roughly 6.58 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of 6.52 billion.

Decliners slightly outnumbered advancers on the NYSE by about 16 to 15, and on the Nasdaq, by about 3 to 2.

(Reporting by Caroline Valetkevitch; Additional reporting by Leah Schnurr Editing by Jan Paschal)

Read More..

Big tech boosts S&P 500 to best close since election

NEW YORK (Reuters) - Stocks rose on Tuesday, led by gains in technology companies, helping the S&P 500 end at its highest level since Election Day.

A 2.2 percent gain to $541.39 in Apple's stock lifted the Nasdaq, as the largest U.S. company by market value rebounded from a week in which investors took profits before a possible tax rise next year. Prior to Tuesday's trading, Apple shares had lost 25 percent from an all-time intraday high hit in September.

Stocks pared some gains by late afternoon as more news on the "fiscal cliff" negotiations emerged. U.S. Senate Majority Leader Harry Reid said it will be difficult to reach agreement resolving the cliff tax hikes and spending cuts before Christmas.

"There's been a real explosion in anxiety over this thing. Because markets have become the way they are, you've got people just stepping back," said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"There's a tremendous absence of liquidity in the market," he said.

The S&P 500 had lost 5.3 percent in the seven sessions following Election Day as investors refocused on the threat posed to the economy by the fiscal cliff, a series of automatic spending cuts and tax increases. Markets have mostly recovered those losses, but volume has been thin, suggesting investors are not betting aggressively due to the uncertainty.

The Dow Jones industrial average <.dji> was up 78.56 points, or 0.60 percent, at 13,248.44. The Standard & Poor's 500 Index <.spx> was up 9.29 points, or 0.65 percent, at 1,427.84. The Nasdaq Composite Index <.ixic> was up 35.34 points, or 1.18 percent, at 3,022.30.

Volume was roughly 6.43 billion shares traded on the NYSE, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of roughly 6.5 billion.

Other major tech stocks also rose. Texas Instruments gained 4 percent to $31.01 after bumping up its profit target late Monday. That helped other chipmakers rally, with the PHLX Semiconductor index <.sox> up 1.9 percent. Microsoft rose 1.4 percent to $27.32.

The lack of demonstrable progress in the fiscal cliff negotiations has kept investors from making aggressive bets in recent weeks.

Republican House Speaker John Boehner called on President Barack Obama to propose a counter-offer on Tuesday.

Retailers like luggage maker Tumi Holding Inc and Michael Kors Holding gained on Tuesday after a positive report from Goldman Sachs Equity Research. Tumi was up 4.7 percent to $21.92 and Michael Kors gained 2.4 percent, reaching $50.92.

By contrast, discount retailers Dollar General and Family Dollar declined. Dollar General, whose shares fell 7.8 percent to $42.94, said it sees margins under pressure in 2013. [ID:nL1E8NB0QB] Family Dollar shares dropped 8.4 percent to $64.68.

SPX Corp shares fell 9.1 percent to $62.07 and the stock was the biggest percentage decliner on the New York Stock Exchange after sources said the company is in exclusive talks to buy rival Gardner Denver , in a merger that could create an industrial machinery conglomerate with a market value over $7 billion.

The U.S. Treasury is selling its remaining stake in insurer American International Group Inc . AIG's shares were up 5.7 percent at $35.26.

The Fed began a two-day policy-setting meeting on Tuesday. The central bank is expected to announce a new round of Treasury bond purchases when the meeting ends on Wednesday to replace its "Operation Twist" stimulus, which expires at the end of the year.

Advancers outnumbered decliners on the NYSE by about 2 to 1, and on the Nasdaq by nearly 9 to 4.

(Additional reporting by Gabriel Debenedetti; Editing by Kenneth Barry and Nick Zieminski)

Read More..

Wall Street gets small lift from technology and McDonald's

NEW YORK (Reuters) - Stocks edged higher on Monday as technology shares bounced back after recent weakness and McDonald's posted strong monthly sales.

Technology stocks were led by Hewlett-Packard Co , which climbed 2.6 percent to $14.16 on rumors that activist investor Carl Icahn is building a stake in the PC maker. The stock is down 44.5 percent for the year and ranks as the Dow's worst performer. The S&P technology index <.gspt> was up 0.3 percent.

Tech also was supported by Cisco Systems , which gained 2.4 percent to $19.79 after the company presented its midterm growth strategy on Friday.

McDonald's Corp gave the Dow a jolt, gaining 1.1 percent to $89.41, as its November sales were stronger than expected and showed a bounce back from a decline in October.

There was little news Monday about the negotiations over the "fiscal cliff," a series of automatic tax hikes and spending cuts that could hurt economic growth next year. Concerns that lawmakers will not broker a deal have kept a lid on optimism in the equity market.

"There is a general sense that if a deal is struck, that we could have a further advance in the market at the end of this year as well as the first part of next year," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

A breakout to the upside on a cliff deal could take the S&P 500 back up to 1,474, just off the 2012 high for the index, said Elliot Spar, Stifel Nicolaus option market strategist in Shrewsbury, New Jersey.

The benchmark S&P 500 index has yet to see a move greater than 0.5 percent in either direction on any day in December, and hasn't moved more than 1 percent either way in any session since November 23. However, the market has regained most of the losses incurred post-election as investors refocused on the fiscal cliff.

U.S. President Barack Obama met with Republican House Speaker John Boehner on Sunday to negotiate a budget deal. A Boehner aide said Monday that talks are continuing.

The Dow Jones industrial average <.dji> rose 14.75 points, or 0.11 percent, to 13,169.88 at the close. The Standard & Poor's 500 Index <.spx> inched up just 0.48 of a point, or 0.03 percent, to 1,418.55. The Nasdaq Composite Index <.ixic> advanced 8.92 points, or 0.30 percent, to close at 2,986.96.

News out of Italy kept sentiment in check as Prime Minister Mario Monti said he would resign after the approval of the 2013 budget. The move added to uncertainty about progress being made to tackle the euro zone's debt problem and drove Italy's borrowing costs higher.

U.S.-listed shares of Nexen jumped 13.8 percent to $26.77 and the stock was the second-most actively traded on the New York Stock Exchange. On Friday, Canada approved a $15.1 billion bid by CNOOC Ltd for energy company Nexen.

The S&P materials index <.gspm> gained 0.7 percent and led the S&P 500's sector index gains as shares of mining companies rose in sync with copper and gold prices. Shares of Freeport-McMoRan gained 1.1 percent to $32.04.

Volume was roughly 5.3 billion shares traded on the NYSE, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of roughly 6.5 billion.

Advancers outnumbered decliners on the NYSE by a ratio of about 17 to 13, while on the Nasdaq, seven stocks rose for every five that fell.

(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel in Chicago and Gabriel Debenedetti in New York; Editing by Jan Paschal)

Read More..

Wall St Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

This week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, on Friday registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

If tax rates are going up, an investor would sell now to book gains and pay lower capital gains taxes, according to Aama. But if an investor has capital losses, then "you take losses and have them count against capital gains or regular income if you do not have any offsetting capital gains.

"In essence, higher capital gains tax rates will give your losses a higher value next year than this year as the income tax shield will be worth more in 2013. So if you have no capital gains this year, you are better off holding off on selling your losers in 2012 and waiting till 2013," he said in an email.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Even with stocks' recent declines, the three major U.S. stock indexes are still up for the year. The Dow Jones industrial average <.dji> is up 7.7 percent for 2012 so far, while the benchmark Standard & Poor's 500 index <.spx> is up 12.8 percent and the Nasdaq Composite Index <.ixic> is up 14.3 percent for the year to date.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there is a decent chance that the market could rally before the year ends.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on <.l>; Pan-European stock market outlook <.eu>; Tokyo stock market outlook <.t>)

Read More..

Wall Street Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on .L/O; Pan-European stock market outlook .EU/O; Tokyo stock market outlook .T/O; Wall St Week Ahead runs every Friday.)

Read More..

Wall Street Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on .L/O; Pan-European stock market outlook .EU/O; Tokyo stock market outlook .T/O; Wall St Week Ahead runs every Friday.)

Read More..