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After The Close - Stocks traded sharply higher this afternoon on hopes of an eleventh-hour agreement in Washington that would avoid the much-in-the-news fiscal cliff of steep government spending reductions and tax hikes at hand. President Obama voiced an optimistic tone that a deal might get done soon and "in stages" when he spoke at the White House today regarding ongoing negotiations.
At the close, Dow Jones Industrial Average had roared ahead by 166 points and the NASDAQ had surged 59 points. A jump in Apple (AAPL) stock helped the NASDAQ outperform the Dow on a percentage basis. Market breadth was strongly positive.

The most actively traded Big Board stock was once again that of Dow-30 component Bank of America (BAC - Free Bank of America Stock Report), whose shares turned in a strong rally in 2012. Bank stocks in general fared very well over the past 52 weeks on improved lending trends and lower loan losses. A strong performance from the financial sector is usually taken as a good sign for the stock market as a whole, since increased lending tends to support additional spending in the economy.

Other pluses for the business community heading into the new year include the comeback in the housing market, supported by the Federal Reserve’s low interest-rate policies, and the boom in domestic oil and natural gas drilling. Inexpensive natural gas is leading to a revival in chemicals manufacturing, as well.

Overall, there are enough positives to build a case for a more enduring economic expansion as we begin the comeback’s fourth full year. But that may depend partly on whether Congress and the White House can complete an agreement that calls for less drastic spending cuts and/or tax hikes in the near term, while still shaping a longer-term deficit-reduction package.

Tomorrow, the financial markets are closed in observance of the New Year’s holiday. The first trading day of 2013 on Wednesday brings a report on manufacturing from the ISM group at 10:00 A.M. (EST) that is expected to show modest progress. The week’s biggest piece of economic data comes on Friday, with the release of the government’s monthly employment report. About 150,000 jobs are expected to have been added in December, which would be in line with the average monthly gain in 2012.

As for Washington, it appears as if lawmakers will be working through the holiday to come to some sort of budget accord. The first step will presumably be to provide tax relief to most Americans from proposed sharp tax increases.  

In the meantime, we wish a happy and safe new year to all.   - Robert Mitkowski       

At the time of this writing, the author did not have positions in any of the stocks mentioned. 

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12:30 PM ET - The U.S. stock market got off to a choppy start this morning, but is now moving into positive territory. As we pass the noon hour in New York, the Dow Jones Industrial Average is up about four points; the S&P 500 Index is ahead by four points (0.3%); and the tech-heavy NASDAQ is leading the charge higher, up 19 points (0.6%). Market breadth suggests a positive bias to the session, as rising stocks are outnumbering falling issues by about 2 to 1 on both the NYSE and the NASDAQ. Most of the market sectors are heading higher today, with solid leadership in the important basic materials, conglomerates, and technology names. In contrast, there is some weakness in the consumer non-cyclical issues as well as in the high-yielding utilities.

Technically, the S&P 500 Index may be looking to firm up, after sliding steadily last week. The Index has broken through its 50-day moving average, located at 1,411, but may find some support at the 1,400 level. This area, since it corresponds to a large round figure, may also carry some psychological significance with traders. Sentiment has turned a bit more positive, for now, as the VIX, Wall Street’s fear indicator, is down almost 9% today, to a reading of just under 21.

Even though a government budget deal has not been reached, traders may still be hoping that a late-day agreement of some kind will be fashioned, and a move over the “fiscal cliff” can be averted. Notably, this issue has become the subject of a great deal of media attention, and the outcome could also have an impact on consumer behavior at this point. Elsewhere, on this last day of the year, there has been no material economic news released. Later in the week, on Wednesday, we will get a look at construction spending. However, the big report will come on Friday, when the December employment figures are released.

The corporate news has been light today. Shares of Cal-Maine Foods (CALM) are down after the company reported weaker-than-expected quarterly results. Elsewhere, Duff & Phelps (DUF) is seeing its stock move higher on news that a private equity group will be acquiring the business.

Active stocks moving higher today include: Facebook (FB), Nokia (NOK), and News Corp (NWSA). Active issues declining include: Rite Aid (RAD), Marvell (MRVL), and Windstream (WIN). - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The Survey – Corporate news remains light today, as many prepare to celebrate the start of the New Year. However, automobile manufacturer Toyota Motor (TM) has announced that it received preliminary court approval for its recently proposed settlement of $1.1 billion in conjunction with the malfunction of a number of vehicles. Also, Bristol-Meyers Squibb (BMY), the drug maker, has received approval for its drug Eliquis, an oral medication, which is used to prevent blood clots and can reduce the risk of a stroke in some patients. The stock rose modestly on the news in the pre-market.   - Kathryn M. Drew

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - The final minutes of trading on Friday gave Wall Street investors a glimpse of what trading could look like in the event that this nation goes off of the fiscal cliff as the New Year hits. Specifically, the dwindling likelihood of even a partial deal by the deadline of January 2nd sent traders scampering for the exits late in the most recent session, as the Dow Jones Industrial Average tumbled by 158 points, or more than a percentage point, ending the session below the psychologically significant 13,000 level, at 12,938. The Standard and Poor's 500 Index also shed more than a percentage point to close just above the 1,400 mark, thereby putting that closely tracked index below its 50-day moving average.

The feelings on the two sides in Washington are anything but festive as the holiday season rolls on, and as the Senate leadership tries to reach some sort of short-term accord that would somehow make it through that chamber. Then, should a deal get brokered between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, and then be passed by the full Senate, that accord would then make it to the House, where passage seems decidedly more remote. It is not a pretty picture as the deadline for tax hikes and corresponding spending reductions draws ominously near.

True, there is other news to decipher. But that is mostly of an economic nature, as the commencement of earnings season is still a fortnight away. And on the economic front, the holiday shortened week to come will feature data on manufacturing activity for December, which is set for release on Wednesday morning some 30 minutes into the trading session. Expectations there are that this metric will have perked up slightly in the concluding month of 2012. Then, on Thursday, we'll get data on weekly jobless claims and auto sales, neither of which should be market moving. Finally, Friday will see the issuance of the December report on non-farm payrolls and the unemployment rate. A payroll increase of 150,000 and a jobless rate that ticks up from 7.7% to 7.8% are the expectations. Also on Friday, we will get monthly data on non-manufacturing activity and factory orders. A slightly lesser increase in non-manufacturing activity in December is the expectation. It should be a similar story for factory orders.

However, while these reports, especially the surveys on employment and unemployment, will have some impact on the stock market, the overwhelming effect will come from the goings on in Washington, where the outcome is, as noted above, most uncertain at this time to say the least.

As for the stock market, the S&P futures are up nicely with about a half hour to go before the start of the trading day, while the NASDAQ futures are in reverse, suggesting an uneven beginning to what could well be a volatile year-ending session and week to come. In closing, we wish all our readers a happy, healthy, and prosperous new year.   – Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.