Wall Street Recovers as Cliff Approaches
Wall Street recovered most of Thursday’s losses, as The White House and Senate look to strike a deal that can pass the “Dictatorial” controlled House of Representatives. The cliff is 4 days away, and tomorrow is the last full session of 2012. Monday will be an abbreviated session for New Years Eve, with exchanges closed on Tuesday….then bam, Fiscal Cliff. The economic
news on the session was mixed, with a steep decline in consumer sentiment (thanks to the heavy/incompetent hand of government), however new home sales rose nicely. After falling below the 13,000 level for the first time in three weeks, the Dow Jones Industrial Average came back from a 150-point decline to end at 13,096.31, down 18.28 points, or 0.1%. The S&P 500 index lost only 1.74 points, or 0.1%, to 1,418.09, with utilities hardest hit and consumer companies the best performing of its 10 industry sectors. That move is surprising considering utilities are considered safety plays with their high dividend yield, while retailers have struggled over the past few sessions following a subpar holiday shopping season. The tech heavy Nasdaq Composite fell 4.25 points, matching the 0.1% retreat of the other major indexes, to 2,985.90. Before the recent market struggles, the broader market was up roughly 7% from November lows. We have given back roughly 2% of that, signaling little upside if a deal gets made (unless its a grand bargain), and a lot of downside.
Crude for February delivery lost 11 cents to settle at $90.87 a barrel on the NYMEX. Gold rose $3, or 0.2%, to $1,663.70 an ounce as the greenback broke the 86 handle versus the yen.
Claims fell 12,000 in the December 22 week to a lower-than-expected level of 350,000. Again, this is the silly season of weekly claims, as the holiday interrupts the accuracy of these numbers. The four-week average for initial claims, which smooths out special factors, is down 11,250 to 356,750, which is roughly 50,000 lower than the Hurricane Sandy-inflated month-ago comparison. The December monthly jobs report is only a short 8 days away and will give a much better indication of the labor market.
The new home market showed strength in November with sales up 4.4 percent to an annual rate of 377,000. October was revised 7,000 lower to 361,000, weakness largely offset by a 5,000 upward revision to September. New home sales, which started the year near 340,000, have slowly been building up momentum this year. Scarcity of supply is a big factor in the home sales market, at 4.7 months at the current sales rate for new homes vs 4.9 months in October. Price readings show gains in the month and strong year-on-year rates, at plus 14.9 percent for the median price and 19.9 percent for the average price.
The last consumer confidence reading of 2012 fell 6.4 points this month to 65.1 with weakness centered in the post-cliff outlook. The consensus reading was 70.0 on the month. The good news is, despite the expectations component taking a plunge, current conditions are actually at the highest level of the recovery!