Tax Talks Hold Dow Hostage; Nasdaq Rises For 7th Day
FOX Business: The Power to Prosper
Wall Street ended in a stalemate on Thursday as the Nasdaq Composite advanced for the seventh day in a row, but uncertainty over what will happen to the expiring Bush tax cuts prevented the Dow from joining its peers at fresh 2010 highs.
Today's Markets
The Dow Jones Industrial Average fell 2.42 points, or 0.02%, to 11370.06, the Standard & Poor's 500 gained 4.72 points, 0.38%, to 1233.00 and the Nasdaq Composite jumped 7.51 points, or 0.29%, to 2616.67. The FOX 50 picked up 3.02 points, or 0.34%, to 883.56.
Aside from negotiations in Washington to extend the Bush tax cuts, Wall Street struggled to find a catalyst, despite a larger-than-expected decline in weekly jobless claims and red-hot bank stocks like Bank of America (NYSE:BAC).
“There’s really nothing to push the market here. As a result it’s kind of settling under its own weight a little bit,” said Peter Kenny, managing director at Knight Capital Group. “The buyers and sellers have all kind of stepped away.”
The bulls have tried and failed countless times this week to lift the Dow above its 2010 high of 11444, which was set on November 5. On the other hand, the blue chips have held onto last week's impressive rally of nearly 300 points.
“I think investor caution is still really there. Investors really want to believe in the market but at the end of the day” there are lingering worries about Europe’s debt crisis and tensions in Asia, said Jonathan Corpina, senior managing partner at Meridian Equity Partners. “As we get into the end of the year, I think we’re going to see investors begin to take money off the table.”
Most of the Dow's 30 stocks closed in the green, led by Bank of America (NYSE:BAC) and Cisco Systems (NASDAQ:CSCO). The index's weakest performers were DuPont (NYSE:DD) and McDonald's (NYSE:MCD), which continues to be hurt by its disappointing November sales.
The Nasdaq Composite managed to keep its ahead above water for the seventh day in a row and landed at its best level since December 31, 2007, boosted by gains from tech stocks like Intel (NASDAQ:INTC) and Oracle (NASDAQ:ORCL). The index has now rallied more than 15% on the year, including a gain of 1.45% over the past five trading sessions.
Wall Street continues to pay close attention to the tax cut negotiations in Washington. Stocks rallied earlier this week on an apparent deal to extend the Bush tax cuts for two years and slash payroll taxes. However, liberal Democrats, especially in the House of Representatives, have resisted the move, casting doubt on whether or not it will muster enough votes for passage or even be voted on at all.
Extending the Bush tax cuts "would definitely give the market more fuel for a move higher,” said Kenny. A deal “would provide clarity” and would be considered bullish for stocks due to “favorable dividend treatment, capital gains treatment and the impact it’s perceived to have on the economy.”
Offsetting concerns about the tax cut negotiations, the financial sector jumped 1.2%, driven higher by surging Bank of America. BofA has seen a big rally since the jailing of WikiLeaks founder Julian Assange as concerns about a possible document dump targeting the bank have eased a bit. At the same time BlackRock (NYSE:BLK) said he is "getting more constructive on banks" for the first time in a year, fueling more interest in big banks like BofA and Wells Fargo (NYSE:WFC).
Wall Street managed to mostly shrug off new weakness for the euro amid worries about a potential ratings downgrade for Italy. The market chatter about Italy came after Fitch slashed Ireland's credit rating by three notches on concerns about its costly banking bailout. The euro fell 0.15% to $1.3240. A stronger is typically seen as bearish because it can weigh on commodities and exports.
U.S. markets initially cheered after the Labor Department said weekly jobless claims declined by 17,000 last week to 421,000. Economists had called for a smaller decline of 13,000 claims. Continuing claims, which are filed by those on benefits for more than one week, tumbled by 191,000 to 4.09 million -- the lowest level since November 2008.
Thursday's stronger-than-expected unemployment report may divert some attention from November's ugly jobs report, which revealed employers added 100,000 fewer jobs than had been anticipated.
In the commodities complex, crude oil gained 9 cents a barrel, or 0.10%, to $88.37. Gold rose $9.60 a troy ounce, or 0.69%, to $1,392.10.
Corporate Movers
American International Group (NYSE:AIG) surged 13% to 52-week highs a day after the giant insurer unveiled a restructuring plan with the Treasury Department. The plan, which governs the repayment of the Federal Reserve and the Treasury’s eventual exit, eased dilution fears sparked by reports of a potential $10 billion share sale in early 2011.
Compellent (NYSE:CML) tumbled 14% after Dell (NASDAQ:DELL) said it is in “advanced discussions” to acquire the data storage company for $27.50 a share, a discount to its $33.65 closing price Wednesday. Compellent’s stock has surged 90% since reports of a potential Dell bid emerged in late October. Dell lost out to Hewlett-Packard (NYSE:HPQ) in a bidding war to acquire data storage company 3Par.
Sirius XM (NASDAQ:SIRI) soared 6% after shock jock Howard Stern said he will stay with the satellite radio operator for another five years. It’s not clear if he took a pay cut from his current contract worth $500 million over five years, but many analysts predicted he would have to because his options for a new landing spot were somewhat limited.
Citigroup (NYSE:C) tapped Peter Orszag, the former budget director under President Barack Obama, as its new vice chairman in global banking. Citi said Orszag’s role won’t involve contact with federal officials.
MasterCard (NYSE:MA) inked a $459 million deal to acquire foreign exchange group Travelex’s prepaid cash card business. If certain performance targets are met, the deal could be worth an additional $55 million. MasterCard said it sees the deal strengthening its global prepaid business assets and adding to its earnings per share beginning in 2013.
DuPont (NYSE:DD) reaffirmed its earnings guidance for 2010 and 2011 and said it sees its sales rising 7% annually through 2015. The chemical giant expects to post a 2010 non-GAAP profit of $3.10 a share, which would meet estimates. DuPont sees compound annual sales growth of about 7% from 2010 to 2015, translating to adjusted earnings growth of about 12%.
Global Markets
The U.K.'s FTSE 100 rose 0.23% to 5807.96, France's CAC 40 advanced 0.68% to 3858.05 and Germany's DAX declined 0.17% to 6964.16.
In Asia, Tokyo's Nikkei 225 jumped 0.52% to 10285.90, Hong Kong's Hang Seng gained 0.34% to 23171.80 and China's Shanghai Composite sold off 1.32% to 2810.95.