Washington Gridlock Drags Indexes for Fifth Day

Nichole Harper
28 Dec, 2012
New York City

U.S. stocks suffer broad losses after Washington gridlock showed no sign of easing. President Barack Obama and congressional leaders are gathering in the White House to avert fiscal cliff that could cut off jobless benefits and delay filing of tax returns for millions of people.

[R]12:45 PM New York – U.S. stocks suffer broad losses after Washington gridlock showed no sign of easing. President Barack Obama and congressional leaders are gathering in the White House to avert fiscal cliff that could cut off jobless benefits and delay filing of tax returns for millions of people.[/R]

Stocks on Wall Street declined for the fifth day in a row on the growing understanding of the implications of automatic tax increases and spending from the beginning of next year.

The budget negotiations between lawmakers took on added urgency after President Barack Obama cut short his vacations and summoned leaders of the Senate and the House to the White House.

In addition, Republican Party scheduled an unusual session of the House on December 30 to find a solution to the impending so called “fiscal cliff.”

Businesses may not be able to issue pay checks in January as the IRS has still not issued the withholding tax rates for 2013, awaiting the budget decision. At least two million people are likely to see their long term benefits cut at the end of the year and as many as 100 million people may not be able file early tax returns because of the budget uncertainties.

Stocks were on the defensive on the fifth day in a row, despite better than expected economic indicators.

Pending home sales index increased 1.7% in November from October and rose 9.8% from a year ago month, according to the latest data released by the National Association of Realtors.

The index increased to 106.4 in the last month and 100 is the base level year that represents the level of contract signing in 2001.

Separately, Chicago area purchasing managers index increased to 51.6 in December, according to the latest data released by the Institute for Supply Management.

European stocks were on the defensive after the preliminary index of third quarter economic activities showed a contraction, third quarterly contraction in four months. Separately, France lowered its economic growth estimate in the third quarter to 0.1% from 0.2%.

Stocks in Tokyo surged for the third month in a row on the expectations that the Bank of Japan will implement more aggressive stimulus measures and lift its inflation target to 2%.

The Nikkei index closed up 23%, the best annual gain since 2005 and first annual increase in three year.

Stocks in Review

Barnes & Noble ((BKS)) shot up 8% after UK based Pearson agreed to invest $90 million in Nook Media, the book retailer’s digital business. .

Canadian Solar Inc. ((CSIQ)) fell 1 cent to $3.36 after the solar wafers maker will acquire a majority interest in two utility scale solar power projects in Ontario with a total capacity of approximately 24 mw. The aggregate transaction price is approximately C$37 million.

Duke Energy Corporation ((DUK)) slipped 43 cents to $63.28 after the electric utility provider agreed to acquire Chilean energy conglomerate Iberoamericana de Energía Ibener S.A. including hydroelectric assets for $415 million. The transaction is expected close in the first quarter 2013.

Facebook ((FB)) declined 2% after media reports suggest that recently acquired Instagram may have lost 25% its active users since the company changed its privacy policy.

Hewlett Packard ((HPQ)) declined 2% and the technology company said Justice Department is investigating Autonomy transaction for a possible fraud or overstating financial results.

Parexel International Corporation ((PRXL)) increased 1.2% or 36 cents to $29.43 after the biopharmaceutical service acquired all the outstanding shares of Liquent, Inc. for $72 million, provider of information technology of regulatory submissions.

The company anticipates reporting consolidated revenue for the second quarter 2013 between $415 million and $420 million and for fiscal in the range of $1.68 to $1.70 billion.

Porsche Automobil Holding SE, the German based automaker, gained 6% after the company won on appeal a dismissal of lawsuit against the company in New York Supreme Court for its purchase of Volkswagen shares.