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Fiscal Cliff Impasse Accentuates Nervousness

The major U.S. index futures are pointing to a lower opening on Friday, with sentiment continuing to reflect the nervousness of traders about the lawmakers' resolve to find an amicable and unanimous approach to tackle the fiscal cliff. Reflecting the risk aversion in play, European stocks are also seeing weakness, while Asian stocks closed higher earlier in the global trading day, drawing encouragement from higher oil prices and a weaker yen. Listless trading may be on the cards, even as the pending home sales data and a regional manufacturing data due to be released shortly after the markets open could influence trading to some extent.

U.S. stocks closed well off the lows of the session on Thursday amid hopes that the fiscal cliff will be negotiated without much impact to the economy and the release of some mixed economic data.

The major averages opened slightly lower despite the release of positive jobless claims data. After seeing some volatility in early trading, the averages declined sharply initially and steadily thereafter until the mid-session. However, the averages pared their losses over the course of the afternoon but still closed slightly lower.

The Dow Industrials ended down 18.28 points or 0.14 percent at 13,096 and the S&P 500 Index closed 1.73 points or 0.12 percent lower at 1,418, while the Nasdaq Composite closed at 2,986, down 4.25 points or 0.14 percent.

Twenty-three of the thirty Dow components closed lower and one stock ended unchanged, while the remaining six stocks rose. Alcoa (AA) and Cisco Systems (CSCO) were among the worst performers of the session.

On the economic front, new home sales rose 4.4 percent month-over-month to a seasonally adjusted annual rate of 377,000 in November. Annually, sales were up 15.3 percent. New home sales rose in the South and the Northeast, while sales declined in the West and the Midwest. New home inventories as measured by the months of supply fell to 4.7 months, while the median sales price of a new home rose 14.9 percent year-over-year to $246,200.

The Conference Board reported that its consumer confidence index for the U.S. fell 6.4 points to 65.1 in December. The expectations index slumped 14.4 points to 66.5, while the present situation index rose 5.4 points to 62.8.

The jobless claims report showed that the number of individuals claiming unemployment benefits fell 12,000 to 350,000 in the week ended December 22nd. The four-week moving average also fell to 356,750 from 368,000 for the week before. Continuing claims for the week ended December 15th declined 32,000 to 3.206 million.

Currency, Commodity Markets

Crude oil futures are trading up $0.21 at $91.08 a barrel after slipping $0.11 to $90.87 a barrel on Thursday. An ounce of gold is currently valued at $1,659.50, down $4.20 from the previous session's close of $1,663.70. In the previous session, gold added $3.

Among currencies, the U.S. dollar is trading at 86.04 yen compared to the 86.10 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.327 compared to yesterday's $1.3235.

Asia

The major Asian markets closed higher, with Chinese stocks leading the advance. As U.S. lawmakers prepared to renegotiate their stance on the fiscal cliff, traders remained optimistic that a middle-of-the-road approach could emerge to tackle one of the severest threats facing the global economy.

The Japanese market remained a key beneficiary of the yen's weakness and rose for the fourth straight session. The key Nikkei 225 average opened higher and moved roughly sideways before ending up 72.20 points or 0.70 percent at 10,395, its highest closing level since March 10, 2011.

Export stocks rallied strongly in the session, capitalizing on the yen's weakness. Basic material stocks Tokuyama and Ube Industries also posted strong gains, while automaker also saw particular strength. On the other hand, electric utilities declined.

Australia's All Ordinaries opened slightly higher and advanced steadily until early afternoon trading. Thereafter, the average gradually pared some of its gains yet ended up 23.90 points or 0.51 percent at 4,685.

The market witnessed broad based strength, with material stocks seeing notable buying interest. Energy and healthcare stocks also witnessed moderate strength.

Hong Kong's Hang Seng Index closed at 22,667, up 46.81 points or 0.21 percent.

Among a slew of economic reports released from Japan, the consumer price inflation report showed that Japanese core consumer prices fell 0.1 percent year-over-year in November. Core consumer prices for Tokyo, considered a leading indicator for Japan, declined a steeper 0.5 percent.

A separate government report showed that industrial output fell a seasonally adjusted 1.7 percent month-over-month in November compared to expectations for a 0.5 percent increase. Annually, output was down 5.8 percent, steeper than the 4.6 percent drop expected by economists.

Meanwhile, retail sales in Japan rose 1.3 percent year-over-year in November compared to the 1.1 percent increase expected by economists.

Europe

European stocks opened notably higher, but since then they have squandered their gains and are currently trading on a negative note.

Revised GDP estimates released by statistical office INSEE showed that the French economy expanded 0.1 percent in the third quarter compared to the initial estimate of 0.2 percent growth,

U.S. Economic Reports

The ISM-Chicago is set to release the results of its regional manufacturing survey at 9:45 am ET. Economists expect the business barometer based on the survey to improve to 51 in December from 50.4 in November.

The business barometer rose to 50.4 in November from 49.9 in October. The production index improved 2.9 points to 54.7 and the order backlogs index climbed 5.3 points to 49.6, while the new orders index declined 5.3 points to 45.3. The employment index was up about 5 points to 55.2.

The pending home sales index compiled by the National Association of Realtors is scheduled to be released at 10 am ET. The index is expected to rise by 1.8 percent in November compared to a 5.2 percent increase in October.

Pending home sales rose by 5.2 percent month-over-month in October, much better than the expected increase. Annually, the index was up 18 percent. The Midwest and the South saw notable increases in pending home sales.

Stocks in Focus

Arthur J. Gallagher (AJG) announced the acquisition of Michigan-based retirement consulting firm Eriksen Group. The companies did not disclose the terms of the deal.

Prologis (PLD) said its co-CEO Walter Rakowich will retire on December 31st, 2012. As previously announced at the time of the AMB and ProLogis merger, Hamid Moghadam will assume the role of CEO and Chairman on January 1st, 2013.

by RTT Staff Writer

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