Published December 13, 2012
FOX Business: Capitalism Lives Here
The markets fell on Thursday as traders responded to continued gridlock in Washington over the U.S. fiscal cliff and a warning from S&P on Great Britain's credit rating.
The Dow Jones Industrial Average fell 74.7 points, or 0.56%, to 13171, the S&P 500 dipped 9 points, or 0.63%, to 1419 and the Nasdaq Composite slumped 21.7 points, or 0.72%, to 2992.
Every major sector ended the day in the red, led by health-care and energy names. The broad S&P 500 snapped its six-day losing streak as well.
Negotiations in Congress aimed at averting the fiscal cliff appeared to advance little Thursday. House of Representatives Speaker John Boehner held a news conference in which he again accused President Barack Obama of slow walking toward the cliff. The painful punch of spending cuts and tax hikes looms just weeks away.
Meanwhile, Standard & Poor's put the U.K.'s top-notch 'AAA' rating on negative outlook from stable. This comes as a blow from one of Europe's biggest economies. Also in Europe, the European Union and International Monetary Fund agreed to provide Greece with its latest $64 billion tranche of rescue aid. The move averts a default on Greek debt.
Wall Street largely shrugged off a new round of monetary easing from the Federal Reserve. The central bank said Wednesday it will begin buying long-term Treasury bonds at a clip of $45 billion a month on top of $40 billion a month in mortgage-backed securities. The move initially sent stocks jumping, but then the markets ended essentially flat. That trend continued Thusrday as traders evaluated the effectiveness of the move.
"$45 [billion] doesn’t buy what it used to," Will Hedden, a sales trader at IG in London, wrote in an email. "The immediate effect on the equities market is proving what we have long feared – that the returns are diminishing with each new stimulus."
Echoing that view, analysts at Deutsche Bank said in a note to clients Thursday morning that central banks ought to be more selective with their easing programs.
"Normally, weak companies fail, leaving the winners to advance and new companies to enter; but at the moment no company can win because the losers never leave the field as they receive support through continuous liquidity injections," they wrote.
There were also several economic reports released on the day.
The Commerce Department said U.S. retail sales rose 0.3% in November from October, less than the 0.5% expected. Excluding the auto segment, retail sales were unchanged from October. November is when the key holiday shopping season kicks off, so analysts are expected to pay especially close attention to these data.
The Labor Department said inflation at the producer level slipped 0.8% in November from October, a bigger drop than then 0.5% economists expected. Excluding the food and energy components, prices rose 0.1%, a shallower gain than the 0.2% forecast.
Another report from Labor showed new claims for unemployment benefits fell to 343,000 last week, the lowest level since the week of October 6, from an upwardly revised 372,000 the week prior. Claims were expected to remain unchanged from an initially reported 370,000.
Elsewhere, the Federal Reserve, European Central Bank and three other major central banks extended temporary U.S. dollar liquidity swap lines through February 2014. The arrangement that has been important in easing strains on European banks, among others, was initially slated to expire in February 2013.
Energy markets were broadly lower. The benchmark crude contract fell 44 cents, or 0.5%, to $86.38 a barrel. Wholesale New York Harbor gasoline fell 0.33% to $2.637 a gallon.
In metals, gold sold off by $22.30, or 1.3%, to $1,696 a troy ounce.
The Euro Stoxx 50 fell 0.27% to 2623, the English FTSE 100 dipped 0.26% to 5930 and the German DAX slipped 0.52% to 7575.
In Asia, the Japanese Nikkei 225 soared 1.7% to 9743 and the Chinese Hang Seng slumped 0.26% to 7575.