Market Analysis

Beyond the Number

Holidays, Fiscal Cliff Uncertainty May Keep Trading Activity Subdued
12/26/2012 9:19 AM

The major U.S. index futures are pointing to a modestly higher opening on Wednesday, with stocks likely to regain some ground after moving to the downside over the past few sessions. Trading activity is likely to remain subdued, however, as many traders remain away from their desks following Christmas.

Uncertainty about the looming fiscal cliff is also likely to keep traders on the sidelines. President Barack Obama is heading back to Washington later in the day after spending the holidays in Hawaii, but lawmakers will have only a few days to try to reach a budget agreement before the year-end deadline.

With worries about the looming fiscal cliff continuing to weigh on investor sentiment, stocks saw modest weakness during trading on Monday. Selling pressure was relatively subdued, however, with many traders away from their desks ahead of Christmas.

The major averages moved roughly sideways going into the close, stuck firmly in negative territory. The Dow ended the day down 51.76 points or 0.4 percent at 13,139.08, the Nasdaq fell 8.41 points or 0.3 percent to 3,012.60 and the S&P 500 slipped 3.49 points or 0.2 percent to 1,426.66.

The modest weakness on Wall Street reflected lingering concerns about the fiscal cliff after a number of the lawmakers that appeared on the Sunday talk shows expressed pessimism about their ability to reach a budget agreement.

With Congress in recess until after Christmas, lawmakers will only have a few days to try to reach an agreement before the year-end deadline.

Unless an agreement is reached, approximately $600 billion in automatic tax increases and government spending cuts are due to go into effect at the end of the year.

Nonetheless, trading activity remained subdued on Monday, as many traders were away from their desks ahead of the Christmas Day holiday.

While most of the major sectors showed only modest, notable weakness was visible among natural gas stocks. The NYSE Arca Natural Gas Index fell by 1 percent, with a decrease by the price of natural gas weighing on the sector.

Tobacco, software, and oil stocks also saw weakness on the day, while modest strength emerged among chemical and gold stocks.

Commodity, Currency Markets

Crude oil futures are climbing $1.41 to $90.02 a barrel after slipping $0.05 to $88.61 a barrel on Monday. Gold futures are rising $4.20 to $1,663.60 an ounce. In the previous session, the precious metal dipped $0.60 to $1,659.50 an ounce.

On the currency front, the U.S. dollar is trading at 83.35 yen compared to the 84.24 yen it fetched at the close of trading on Tuesday. Against the euro, the dollar is valued at $1.3208 compared to yesterday’s $1.3188.


Stock markets across the Asia-Pacific region moved mostly higher on Wednesday, although some major markets remained closed for public holidays.

Japanese shares rallied on the weaker yen, which fell to a 20-month low versus the dollar on growing speculation that the Bank of Japan will usher in further easing measures to beat deflation and bolster the economy.

After moving modestly higher in morning trading, Japan’s Nikkei 225 Index saw further upside in the afternoon. The index ended the session up 150.24 points or 1.49 percent at 10,230.36.

The yen's weakness lifted export-related stocks such as Sony and TDK up by 4-5 percent, while shares of Toyota Motor rose 1.3 percent. Shipping line Mitsui O.S.K. Lines soared 7.5 percent, consumer credit lender Credit Saison jumped 6.9 percent and brokerage Nomura Holdings added 2.8 percent.

China's Shanghai Composite index crept up by 5.52 points or 0.25 percent to 2,219.13, adding to the previous session's 2.5 percent rally. Property stocks gained ground on expectations that China's urbanization will drive demand for home projects.

Korean stocks ended almost unchanged as concerns over the looming U.S. fiscal cliff weighed on investor sentiment. The benchmark Kospi average edged up 0.43 points or 0.02 percent to 1,982.

Elsewhere, the major averages in Indonesia, Malaysia and Singapore were up between 0.1 percent and 0.4 percent, while the Taiwanese market was down marginally. Equity markets in Australia, Hong Kong and New Zealand were closed for Christmas holidays.


All of the major European markets remained closed for the second straight day due to the Christmas holidays.

U.S. Economic Reports

Home prices in major U.S. metropolitan areas rose by a little more than economists had been expecting in the month of October, according to a report released by Standard & Poor’s on Wednesday.

The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index rose by a seasonally adjusted 0.7 percent in October following a 0.4 percent increase in September. Economists had expected prices to increase by 0.5 percent.

Compared to the same month a year ago, the index was up by 4.3 percent compared to economist estimates for a 4.1 percent increase.

Stocks in Focus

Fushi Copperweld (FSIN) is moving higher in pre-market trading after company announced that it expects to complete its merger with Green Dynasty today. The company said it is requesting that shares of its common stock cease trading on NASDAQ immediately prior to the opening of the market tomorrow.

PSS World Medical, Inc. (PSSI) is also moving to the upside on news that McKesson (MCK) has received early termination of the Hart-Scott-Rodino Act waiting period for its PSS World acquisition.

Meanwhile, shares of SINA Corp. (SINA) are under pressure in premarket trading amid reports that the company has refuted rumors that Alibaba is looking to invest in its micro-blogging service Weibo.
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