Stocks Waver, Lawmakers Struggle to Narrow Differences

Bikram Pandey
14 Dec, 2012
New York City

U.S. stocks drifted directionless as lawmakers fail to find a common ground to avoid automatic spending cuts and tax increase set to kick in two weeks. Apple Inc declined 3% and extended losses to 40% from the peak in September as China debut of iPhone 5 failed to impress analysts.

[R]4:00 PM, New York – U.S. stocks drifted directionless as lawmakers fail to find a common ground to avoid automatic spending cuts and tax increase set to kick in two weeks. Apple Inc declined 3% and extended losses to 40% from the peak in September as China debut of iPhone 5 failed to impress analysts.[/R]

The U.S. indexes struggled to gain a direction and mostly trended lower on the growing awareness that political leaders are far from united in their resolve to avoid the automatic spending cuts and tax increases.

President Barack Obama and Speaker of the House John Boehner met for the third time on Thursday to narrow the differences and agree on a framework for the budget. Investors are increasingly factoring the possibility of negotiations dragging into early 2013.

In corporate deal making, Discovery agreed to acquire SBS Nordic operations for $1.7 billion and PPG agreed to buy the North American coatings business of AkzoNobel for $1 billion.

Apple Inc ((APL)) declined 3% after the debut of iPhone 5 was weaker than expected in China. UBS AG lowered its price target on the stock to $700 from $780 and Jeffries lowered its revenues and earnings outlook.

Apple’s stock has corrected 40% from its peak in September and still up 26% in the year so far.

On the earnings front, Adobe’s fourth quarter net surged 28% to $222.3 as cloud revenue jumped. Nordson fourth quarter net climbed 24% and lifted sales outlook. Quiksilver fourth quarter net tumbled 94% and VeriFone net plunged 86%.

Across the Atlantic, European leaders approved at the final summit to implement a single banking supervisory authority that will oversee at least 150 large banks in the euro zone and if needed will monitor any of the other smaller 6,000 banks.

However, leaders could not agree on the size of the rescue fund that will manage the future bank bailout and settled for a smaller size of less than 20 billion euros for now. The long sought step of integrating banking supervision and deposit guarantee and prevent local political interfering in the bank debt build up.

The euro zone private sector contraction eased in December. French ratings were affirmed but the UK ratings downgraded to negative. New car registration in the EU slumped in November.

UBS faces a fine of $1 billion in the Libor probe. ABB plans to restructure its power systems division to seek higher returns. G4S agreed to buy South Africa-based Deposita for £8.2 million.

Stocks in Japan traded near the recent highs and the yen dropped to a 9-month low. Markets have rallied in the last three weeks on the hopes that the main opposition party is likely to win the next general election on Sunday.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond decreased to 1.7% and on 30-year bond fell to 2.87%.

The U.S. dollar inched lower to $1.3105 to a euro and increased against the Japanese yen to 83.50 yen.

Immediate delivery futures of Texas crude oil increased 55 cents to $86.44 a barrel and Brent crude gained $1.15 to $109.08, futures of natural gas decreased 6 cent to $3.29 per mbtu and gasoline traded up 4.69 cents to 264.76 cents a gallon.

In metals trading, gold decreased 40 cents to $1,696.40 per ounce and silver added 12 cents to $32.47 and copper closed up 1.70 cents to $3.67 a pound.