By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks finished mostly lower on
Monday, with the S&P 500 Index ending a five-session winning
streak, as lawmakers readied to debate the so-called fiscal
cliff.
"It's like coming back to earth in terms of reality sinking back
in. We started this with a lot of good feelings and nice words, but
coming to a real deal is a lot harder," said Bill Stone, chief
investment strategist at PNC Asset Management Group, of White House
and congressional efforts to reach a budget deal.
"We wouldn't be surprised if we don't get a deal until next
year, though no doubt they are going to try. But they are further
away than the early good rhetoric would have made you feel," Stone
added.
Stock indexes came off session lows, with the Nasdaq Composite
Index (RIXF) turning positive, after Bloomberg News reported the
European Central Bank was receptive to the idea of giving up its
profits on Greek debt.
The reported move is "a likely step closer to getting a deal
amongst the troika on Greece," wrote Peter Boockvar, an equity
strategist at Miller Tabak, in emailed comments.
After a 109-point drop, the Dow Jones Industrial Average (DJI)
fell 42.31 points, or 0.3%, to end at 12,967.37, with 23 of its 30
components in retreat.
UnitedHealth Group Inc. (UNH) fell 0.7% after the insurer and
Dow component projected 2013 profit lower than Wall Street
estimates.
The S&P 500 (SPX) declined 2.86 points, or 0.2%, at
1,406.29, with telecom and energy declining the most among its 10
major industry groups and utilities and technology faring best.
Bucking the negative trend, the Nasdaq gained 9.93 points, or
0.3%, to 2,976.78, with shares of social-networking firm Facebook
Inc. (FB) rallying 8.1%. Shares of iPhone and iPad maker Apple Inc.
(AAPL) rose 3.2%.
On the New York Stock Exchange, 633 million shares traded
Monday. Composite volume exceeded 2.9 billion.
Oil prices declined along with equities, with crude futures for
January delivery down 54 cents at $87.74 a barrel.
Treasury prices gained with the yield on the benchmark 10-year
note , used in figuring the rates on mortgages and other consumer
loans, falling to 1.66%.
Cliff dwellers
Congress is back in session this week after the Thanksgiving
break, with lawmakers looking to reach an agreement to avert more
than $600 billion in automatic tax hikes and across-the-board
spending cuts that would kick in next year.
David Kelly, chief global strategist at J.P. Morgan Funds,
believes a deal will be reached before Christmas, but until then,
markets will be in the dark on the impact on tax rates and the
economy. Such uncertainty, he said, is "restraining gains in
economic activity, stock prices and interest rates."
"Once the fiscal fog clears, all three could move higher,
suggesting that this probably remains a time to be a little
overweight risk assets," Kelly wrote in a research note.
In an unexpected development Monday, Bank of Canada Gov. Mark
Carney was appointed to be the next head of the Bank of England.
Carney, the current head of the Group of 20's Financial Stability
Board, succeeds Mervyn King at the helm of the central bank.
In Brussels, euro-zone finance ministers met again in an effort
to settle on the release of another rescue payment to Greece, after
failing to do so in two other attempts this month.
The simplest and cheapest solution to Greece's debt fiasco is
for other European governments to give it enough money to get its
economy growing again in the short term, in exchange for long-term
fiscal reforms, according to Kelly.
"The cost of not lending Greece money appears too high for the
Europeans to refuse to do so. However, loans in return for
additional austerity in an already disastrous economy is simply the
wrong policy," he wrote.
Yardeni sees year-end rally
U.S. consumers were active during the long weekend, giving
retailers a robust beginning to the holiday-shopping season,
according to data released Sunday afternoon.
On Friday, Wall Street gained for a fifth session, with the
S&P 500 advancing 3.6% on the week, as some analysts suggested
the holiday-shortened week's rise was setting the stage for a
year-end rally.
"As we all know, stock prices have a tendency to do well this
time of year. Sometimes rising stock prices during the week of
Thanksgiving set the stage for a year-end rally. I'm still
expecting one this year," wrote Ed Yardeni, chief investment
strategist at Yardeni Research Inc., in a note.
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