Wall Street falls, hit by Reid's "fiscal cliff" comments

NEW YORK Tue Nov 27, 2012 6:55pm EST

1 of 5. A trader works on the floor of the New York Stock Exchange, November 27, 2012.

Credit: Reuters/Brendan McDermid

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Stocks slip on cliff caution

Tue, Nov 27 2012

NEW YORK (Reuters) - Stocks slid on Tuesday in a choppy session, losing ground in the last hour before the close after Senate Majority Leader Harry Reid expressed disappointment that there has been "little progress" in dealing with the "fiscal cliff."

The market was flat for most of the session but fell sharply after Reid's comments, a signal that investors remain skittish about the wrangling in Washington. The CBOE Volatility Index, or VIX, rose on Reid's words.

"It may be that the market feels the goodwill before (last week's) Thanksgiving is evolving into more political intransigence," said Quincy Krosby, market strategist at Prudential Financial in Newark.

"The clock is ticking on Wall Street, regarding a framework for (political) consensus," she said.

Markets are focused on whether Congress and the White House can agree on ways to avoid some $600 billion in automatic spending cuts and tax increases that are due to kick in early next year.

As budget talks linger, Las Vegas Sands (LVS.N) and Supertex SUPX.O added their names to a growing list of companies announcing special dividends aimed at helping investors avoid a possibly higher tax burden next year.

Higher dividend and capital gains taxes are part of the negotiations in Washington and may rise even if a deal is crafted.

Las Vegas Sands jumped 5.3 percent to $46.36. Supertex rose 6.9 percent to $18.

The S&P 500's modest losses on Tuesday marked its worst day in eight sessions - indicating traders are unwilling to sell aggressively as a deal probably would trigger a rally. The benchmark S&P 500 once again closed below 1,400, a key psychological level that it had reclaimed last week as it rose nearly 4 percent.

The VIX .VIX shot up 2.7 percent to 15.92 at the close. Between 2 p.m. and 3 p.m. in New York, the VIX was up 3.9 percent.

The Dow Jones industrial average .DJI fell 89.24 points, or 0.69 percent, to 12,878.13 at the close. The S&P 500 .SPX dropped 7.35 points, or 0.52 percent, to finish at 1,398.94. The Nasdaq Composite .IXIC lost 8.99 points, or 0.30 percent, to end at 2,967.79.

Dealings in Washington obscured strong economic figures, including an increase in planned business spending and consumer confidence hitting its highest level in more than four years.

Strengthening the case for a sustained rebound in housing, single-family home prices rose for an eighth straight month in September. Shares of M/I Homes (MHO.N) gained 2.1 percent to $22.36. KB Home (KBH.N) added 1.1 percent to $14.61.

"As long as you have interest rates as low as they are right now, housing is definitely back," said Brian Amidei, managing director at HighTower Advisors in Palm Desert, California.

In another good sign for consumer demand, Corning Inc (GLW.N) shares rose 6.9 percent to $12.13 after the specialty glass maker said it expects full-year sales of its Gorilla glass, used in smartphones and tablets, to approach $1 billion.

Food maker Ralcorp Holdings RAH.N shares jumped 26.4 percent to $88.80 after long-time suitor ConAgra Foods (CAG.N) sealed a deal to buy it for $5 billion. ConAgra shares gained 4.7 percent to $29.63.

McMoRan Exploration Co MMR.N shares tumbled 15.2 percent to $8.18 a day after the oil and gas driller gave a disappointing update on a key gas prospect in a Gulf of Mexico well.

About 5.9 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.5 billion shares.

On the NYSE, roughly five issues fell for every four that rose. On Nasdaq, six stocks fell for every five that rose.

(Reporting by Rodrigo Campos; Additional reporting by Caroline Valetkevitch; Editing by Jan Paschal)

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Comments (4)
Samrch wrote:
What economist advocates debt reduction in a time of high unemployment?
One source of debt reduction that will not raise underemployment is a change in trade policies which have not worked for decades. Any economic unit must sell at lest as much as it buys that includes the USA. The world trade rules are stupid to that reason. An noncompetitive nation has to remove the cause if it easily removed and until speed things up put tariffs on things the do not need and bankroll firms that are expanding exports in an industry that pay wages. Not owing money does not mean some can or will want to start a business in your nation.

Nov 27, 2012 9:12pm EST  --  Report as abuse
boonteetan wrote:
Never mind about the fiscal cliff, focus on the national debt.

The US national debt now stands at $16.3 trillion. How many people really know what a billion is, let alone a trillion, what more 16.3 trillions?

Government keeps printing big money at full force, estimated up to maximum of $8 billion a day. At 24 hours a day, 7 days a week and non-stop, it would take more than 5.5 years to get $16.3 billion printed. During this period, the debt could have soared 80 to 100% higher.

End result: Go for default. Can’t believe, just wait. (vzc1943)

Nov 28, 2012 1:27am EST  --  Report as abuse
UnPartisan wrote:
@Samrch

Non Keynesian economists would advocate deficit reduction no matter when you are heading towards lowered credit ratings. We can’t even begin to nip at the debt right now. We have a $1.1 TRILLION deficit. We currently pay $400 billion a year for interest on our debt. If we don’t get the budget deficit in order, that $400 billion we WASTE each year on interest grows. If we don’t pay out on interest our credit rating drops, and the interest grows. If we fold altogether the dollar becomes worthless.

So you tell me. What economist would advocate continued deficit spending when we are heading into a debt crisis? Would that economist be in Greece, Spain, or Italy?

Nov 28, 2012 3:29pm EST  --  Report as abuse
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