Washington's positive tone cheers Wall Street for a day

NEW YORK Fri Nov 16, 2012 6:50pm EST

1 of 4. Traders work on the floor of the New York Stock Exchange, November 16, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Hope that politicians would find common ground to steer clear of the "fiscal cliff" boosted stocks on Friday, though the gains were not enough to offset the week's losses.

Stocks recovered from early declines after leaders of the Senate and House emerged from a meeting at the White House and indicated they would be flexible in efforts to settle fiscal policy differences.

Democrats said they recognized the need to curb spending and Republicans said they had agreed to put "revenue on the table" following a meeting with President Barack Obama.

For the week, the S&P was down 1.5 percent, its second week in a row of losses. The Dow lost 1.8 percent, down for the fourth straight week, while the Nasdaq was lower for the sixth week, also losing 1.8 percent.

"These are very small steps in the right direction," said Kate Warne, investment strategist at Edward Jones in St Louis.

"The more evidence there is that Congress will make a decision sooner, the more likely we are to see stocks rebound."

About $600 billion of automatic budget cuts and tax increases will start to take effect in the new year unless Washington reaches a deal. With memories of 2011's debt ceiling impasse fresh in investors' minds, many are worried this year's discussions could be drawn out or yield no agreement.

If all the changes go into effect, economists say it could tip the economy into recession. Investors have pulled out of stocks over the past two weeks, taking nearly 4 percent off the S&P 500.

The Dow Jones industrial average .DJI added 45.93 points, or 0.37 percent, to 12,588.31. The Standard & Poor's 500 Index .SPX rose 6.55 points, or 0.48 percent, to 1,359.88. The Nasdaq Composite Index .IXIC gained 16.19 points, or 0.57 percent, to 2,853.13.

Shares of Penn National Gaming Inc (PENN.O) surged 28.2 percent to $48.23 on its busiest day of trading in more than four years, after the owner of gaming and pari-mutuel properties said late Thursday it will split its business into a gaming-focused real estate investment trust and a gaming operator.

More than 10 million shares changed hands, compared with average daily volume of 629,000 shares over the past 50 days.

Dell Inc DELL.O helped limit the Nasdaq's gains after lower PC sales hurt the company's profit. Dell slumped 7.3 percent to $8.86.

More violence in the Middle East also kept investors wary after Palestinian militants nearly hit Jerusalem with a rocket for the first time in decades and fired at Tel Aviv for a second day.

Sears Holdings Corp (SHLD.O) late Thursday reported a quarterly loss that was narrower than expected, but same-store sales fell on weak demand for electronics, sending shares down 18.8 percent to $47.49.

Volume is expected to be light next week with some investors away for the Thanksgiving holiday, and the market closed on Thursday and open for only a half-day on Friday.

The decreased liquidity could spell more intra-day volatility for the market, though fewer market participants could also mute action.

Volume on Friday was roughly 7.52 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, well above the year-to-date average daily closing volume of about 6.52 billion.

Advancers outnumbered decliners on the NYSE by 2,258 to 784 on the New York Stock Exchange. On the Nasdaq, advancers also had the upper hand by 1,446 to 997.

(Editing by Kenneth Barry)

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Comments (4)
BlueOkie wrote:
We headed toward the fiscal cliff in 2000. We accelerated in 2004, 2008 and again in 2012. We reelected the bums. No one to blame but us.

Nov 16, 2012 10:07am EST  --  Report as abuse
Harry079 wrote:
Slip sliding away…slip sliding away…the more your near your destination the more your slip sliding away.

Nov 16, 2012 10:13am EST  --  Report as abuse
ChuckK wrote:
“Fiscal cliff”… Sounds really bad, doesn’t it? Thanks to Ben Bernanke, Americans are afraid. He’d told us that going over that cliff means a recession. True, it would.

But, on the other hand, continued deficit spending would “lead to larger negative effects on GDP and GNP and to larger increases in interest rates… Ultimately, leading to federal debt that would be unsustainable both from an economic and from a budgetary perspective.” (CBO Economic and Budgetary Outlook, Aug 2012)

From a political standpoint, borrowing more money to fund economic growth today, would make voters happy in the short-term, but screw us all in the future. From a logical standpoint, going over the cliff and getting our gov to spend within its means, would make voters unhappy today, but at least they could look forward to tomorrow.

Pay me now, or pay me (a lot more) tomorrow…

Nov 16, 2012 12:16pm EST  --  Report as abuse
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