U.S. stocks pared most of their earlier losses in the final hour of trading as the House of Representatives planned a session on Dec. 30, fueling optimism a budget deal will be reached.
Consumer discretionary and staples stocks reversed declines, each climbing 0.1 percent among 10 groups in the Standard & Poor’s 500 Index. Expedia Inc. (EXPE:US) rallied 4.1 percent, the most in the benchmark index. Bank of America Corp. (BAC:US) and JPMorgan Chase & Co. slid at least 0.6 percent, pacing losses among financial shares. Marvell Technology Group Ltd. (MRVL:US) slid 3.5 percent after being downgraded by JMP Securities LLC.
The S&P 500 (SPX) dropped 0.1 percent to 1,418.10 at 4 p.m. in New York, after earlier retreating as much as 1.3 percent. The Dow Jones Industrial Average lost 18.28 points, or 0.1 percent, to 13,096.31. Almost 5.2 billion shares traded hands on U.S. exchanges, or 15 percent below the three-month average, according to data compiled by Bloomberg.
“This market has held up remarkably well recognizing that this is political theater and that there is a decent chance that some bridge will be built at the last minute,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm oversees $6.5 billion in assets. “Dec. 30 is a Sunday. They’re making all of this extra effort to save the day at the last minute.”
The S&P 500 has slipped 0.8 percent this week as talks between President Barack Obama and Congress dragged on beyond the Christmas holiday. The gauge has still rallied 13 percent this year. Obama is pushing lawmakers to agree on an interim deal to avert more than $600 billion of automatic tax increases and spending cuts, known as the fiscal cliff, that will otherwise come into effect next month.
Stocks tumbled earlier today after Senate Majority Leader Harry Reid said a resolution to the dispute before Jan. 1 appears unlikely because Republicans won’t cooperate. Equities pared losses as Majority Leader Eric Cantor said today in a message posted on Twitter that the House will convene the evening of Dec. 30. Democratic and Republican leaders of the House and Senate plan to meet with Obama tomorrow, Senator Dick Durbin said after the close of U.S. markets.
Treasury Secretary Timothy Geithner wrote in a letter to Congress yesterday that the federal debt limit will be reached on Dec. 31 and his department will begin using “extraordinary measures” to finance $200 billion in deficits in early 2013.
“The markets remain held hostage to the perceived negotiations in Washington regarding the fiscal cliff,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion, said in a telephone interview. “It’s our take that there are talks going on and that they’re substantive, but time is growing short.”
Equities also fell earlier today after data showed confidence among U.S. consumers declined more than forecast in December as the budget debate soured Americans’ outlook for the economy. The Conference Board’s index of sentiment fell to 65.1 from a revised 71.5 reading the prior month, figures from the New York-based private research group showed today. The gauge was projected to fall to 70, according to the Bloomberg survey median.
Sales of new houses rose in November to the highest level in more than two years, another report showed. Fewer Americans than forecast filed claims for unemployment insurance last week as state offices rushed to tally the data in a holiday-shortened period.
Consumer (SPXL1) discretionary stocks advanced the most out of 10 S&P 500 groups today after earlier falling as much as 1.3 percent. Expedia rallied 4.1 percent to $60.30. The online travel-booking service is buying a majority stake in German hotel booking and search site Trivago for about $630 million in cash and stock, according to a Dec. 21 joint press release.
J.C. Penney Co. slumped 5.9 percent to $19.52 for the biggest drop in the benchmark U.S. equity index.
Financial stocks declined 0.4 percent. Bank of America, the second-largest U.S. bank by assets, slumped 0.6 percent to $11.47. JPMorgan, the largest, lost 0.8 percent to $43.63.
Marvell Technology fell 3.5 percent to $7.14 after the stock was cut to market perform (MRVL:US) from market outperform by JMP, which cited numerous headwinds. The maker of chips for computers and mobile phones tumbled 10 percent yesterday as a U.S. jury ordered it to pay $1.17 billion, a penalty that may be tripled, for infringing patents on integrated-circuit technology held by Carnegie Mellon University.
Smith & Wesson Holding Corp. advanced 3.8 percent to $8.26 as the gunmaker expanded its stock repurchase program by $15 million. The shares have lost 13 percent since the day before a gunman killed 20 students in a Connecticut elementary school on Dec. 14. The stock closed at $11.02 at the end of September.
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