Budget Impasse Saps Confidence and Stocks

Nichole Harper
27 Dec, 2012
New York City

Stocks on Wall Street fell after Senate Majority Leader Harry Reid said budget deal before year-end is unlikely. Marvell Technology plunged after it lost a patent case with $1.17 billion penalty. Confidence index in December fell to the lowest level since August on Washington gridlock.

[R]12:00 PM New York – Stocks on Wall Street fell after Senate Majority Leader Harry Reid said budget deal before year-end is unlikely. Marvell Technology plunged after it lost a patent case with $1.17 billion penalty.[/R]

Stocks and market indexes in New York trading fell for the fourth session in a row after budget negotiations are likely to drag into next year.

Harry Reid, Senate Majority Leader and top Democrat said the deal between two parties to avoid automatic tax increase and spending cuts before the year-end is unlikely.

President Barack Obama called Congressional leaders to settle differences and Republican Party is set to hold a conference among members to discuss various options.

Separately, Treasury Secretary Timothy Geithner wrote in a letter to Congress yesterday that his department will be forced to use “extraordinary measures” to finance $200 billion in deficit in early months of 2013.

Federal debt limit is expected to be reached on December 31 and a debt revision is caught in the so called ‘fiscal cliff’ negotiations.

Weekly initial unemployment claims filed at the end of last week decreased 12,000 to 350,000, according to the latest data released by the U.S. Labor Department.

Separately, Commerce Department said new home sales increased to a 377,000 annual rate in November, the highest since April 2010.

The new home sales reached to the highest level in more than two years offering the latest evidence that the housing market is experiencing steady recovery.

The dollar reached a 27-month high against the yen after the yen traded as low as 85.75 on the prospect aggressive stimulus from the Japanese government. Finance Minister Taro Aso said Prime Minister Shinzo Abe has requested stimulus bill that overrides the previous government limit set for bond offerings.

Stocks in Review

Expedia Inc ((EXPE)) increased 4% to $60 and the online travel agency agreed to acquire a majority stake in German hotel booking and search site Trivago for $630 million in cash and stock.

J.C. Penney Co. ((JCP)) dropped 6% to $19.65 after retail stocks declined after holiday sales growth declined to half from the year ago period according to MasterCard Advisors SpendingPulse.

Marvell Technology ((MRVL)) extended loss by 5% after plunging 10% yesterday after a U.S. jury ordered $1.17 billion penalty for infringing patents held by Carnegie Mellon University.

Smith & Wesson Holding Corp ((SWHC)) gained 3% after the gun maker said its board approved an additional $15 million to repurchase its stock after completing a recent buyback program.

Steinway Musical Instruments, Inc., the musical instruments maker terminated the tentative agreement to sell its band-instrument division after strategic review by the board members.

After receive the proposal in July, Steinway engaged Allen & Company LLC to assist the proposal and other strategic alternatives available to the company.