Another debt ceiling debacle could sink the economy
Last year's Congressional debt standoff hurt consumer confidence more than the collapse of Lehman Brothers, Betsey Johnson and Justin Wolfers write. This time could be worse. Read more at Counterparties
Wall Street rally fades after warnings on Europe
Traders work on the floor of the New York Stock Exchange December 13, 2011.
Credit: Reuters/Brendan McDermid
NEW YORK |
NEW YORK (Reuters) - A rally in stocks fizzled, leaving major indexes with modest gains on Friday, as Wall Street was torn between hope that U.S. economic data signals better times ahead and fear Europe's debt crisis will engulf world economies.
About 8.9 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq, higher than this year's average of 7.9 billion.
Trading was choppy due to "quadruple-witching," the expiration of four types of futures contracts -- equity options, stock index futures, stock index options and single stock futures.
After an early rally, buying dried up when rating agency Fitch warned of risk of recession in Europe.
Major U.S. stock indexes, highly correlated to the performance of the euro, slipped in tandem with that currency after Fitch revised its outlook on France's AAA rating to negative, which means a downgrade is possible in 12 to 18 months.
"Investors are tired of headlines coming out of Europe and tired of the fact that there isn't a cohesive solution. But then, it's never one way or the other so they can't just ignore them," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedfor Hills, New York.
The Dow Jones industrial average .DJI was down 2.42 points, or 0.02 percent, at 11,866.39. The Standard & Poor's 500 Index .SPX was up 3.91 points, or 0.32 percent, at 1,219.66. The Nasdaq Composite Index .IXIC was up 14.32 points, or 0.56 percent, at 2,555.33.
The Nasdaq performed relatively better as stocks tied to growth, including technology, gained. Shares of Adobe Systems Inc (ADBE.O) jumped 6.6 percent to $28.20 after results from the maker of Photoshop and Acrobat software beat Wall Street projections.
For the week, the Dow fell 2.7 percent, the S&P lost 2.9 percent and the Nasdaq was down 3.5 percent.
U.S. financials .GSPF, which have underperformed the S&P 500 this week, were one of the strongest of the 10 top sectors in the benchmark index, up 0.5 percent. Credit card company Discover Financial (DFS.N) added 5 percent to $24.23 a day after posting strong results and raising its dividend.
Online game maker Zynga Inc (ZNGA.O) shares opened 10 percent above their initial public offering price of $10 per share but rolled back showing that investors were concerned about the Farmville maker's dependence on Facebook. Shares hit a session low of $9 and closed at $9.50.
U.S. consumer prices were flat in November as Americans paid less for cars and gasoline, while the 12-month inflation reading fell for the second straight month, which could give the Federal Reserve more room to help a still-weak economy.
Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis, said subdued inflation will be a long-term positive as consumers benefit from contained prices.
"That's one of the reasons you're seeing better consumer (confidence) of late," he said.
Research In Motion Ltd (RIM.TO)(RIMM.O) posted a sharp drop in profit on Thursday, offered a dismal outlook for BlackBerry shipments during the holidays and delayed an overhaul of its smartphones. The U.S.-traded stock dropped 11.1 percent to $13.44.
Data this week suggested a strengthening U.S. economic recovery, giving further support to equities.
Jobless claims fell to a 3-1/2-year low last week and factory activity in parts of the Northeast picked up in December, data showed on Thursday.
(Reporting by Angela Moon; Editing by Kenneth Barry)
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This cannot be solved by a “comprehensive solution” as there is too much debt here….the only possibility would be to wipe the slate clean for every country and start over. And many countries would be right back in the soup within a year or so due to unions and unrealistic demands from the citizens.
But what do you mean by “to wipe the slate clean”?
You mean they should all default and go bankrupt?
The US could try this too.
Fitch warned it “may” downgrade: you know, “sell the rumor, buy…”
Fitch just made things worst: the interest rates will go up, nothing to help Europe, and thus the whole world.
Those who buy European bonds are supposed to be knowledgeable investors and they do not need Fitch to know that it is risky.
[And had probably told in advance some privileged clients, so that they could be ready for a drop in the markets.]
1) No politician is going to give up the spending TOOL.
2) No politician is going to welcome some bureaucrat OKing his budget.
3) No politician is going to long tolerate cries from austerity and contracting economy constituents.
4) Germany, the major piece of beef in the EU, would be foolish to bail all these losers. Look at opposition in Greece and Italy!
5) You can’t just shift debt around so it doesn’t adversely impact anyone.
6) The ECB can’t long shore up demand for Italy’s and Spain’s bonds.
7) Investors correctly size up risk with demanded yields.
All these attempts are time buying exercises. It can’t end pretty!
Gorm
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