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TheStreet Open House

Stocks Slump for First Time This Week as Fiscal-Cliff Talks Skid

NEW YORK ( TheStreet) -- Major U.S. stock averages fell for the first time this week as politicians wrangled over the "fiscal cliff" deal in Washington.

A bright spot was the rising optimism over the housing market recovery.

The Dow Jones Industrial Average was down 99 points, or 0.74%, at 13,252 on Wednesday. The blue-chip index is up more than 9% this year.

Breadth was negative, with losers outpacing winners 27 to three. The biggest blue-chip decliners were General Electric (GE), Alcoa (AA), American Express (AXP) and Home Depot (HD).

Shares of conglomerate GE slid 3.1% as UBS took the stock off its "key call" list, citing the risk of softer-than-predicted profit amid uncertain economic conditions.

Alcoa shares shed 3% as the company faces the possibility of a downgrade from Moody's, potentially pushing its credit ratings into junk territory, because of a steep decline in aluminum prices this year.

The only percentage gainers were United Technologies (UTX), Caterpillar (CAT) and Intel (INTC).

The S&P 500 fell 11 points, or 0.76%, at 1,436. The Nasdaq dipped 10 points, or 0.33%, to 3,044.

Action was mixed among sectors in the broader market with conglomerates, health care, utilities and basic materials among those in the red. The capital goods, consumer cyclical and transportation sectors rose.

Decliners edged advancers incrementally on the New York Stock Exchange, but winners slightly beat losers on the Nasdaq. Volumes totaled 3.78 billion shares on the Big Board and 1.90 billion shares on the Nasdaq.

"As for the fiscal cliff, the rejoicing over a deal yesterday and ebullience in the equity market is taking the first step toward realizing that no deal is done and positions are hardening," said Richard Gilhooly, U.S. director of interest rate strategy at TD Securities. "The threat of veto of Plan B will not sit well with the GOP and talks are likely to extend beyond next Tuesday."

The White House said Wednesday that President Barack Obama would veto Republicans' "Plan B," a proposal that was put forth as a back-up in case the budget negotiations couldn't be resolved by Jan. 1.

Plan B would raise tax rates on Americans with incomes of more than $1 million and could address the estate tax and the alternative minimum tax. However, it would not avert the spending reductions that would set in next year.

"It is my contention that the constructive technical action of the underlying market will not be toppled by a setback in the fiscal cliff negotiations," said Gene Peroni, senior vice president of equity research at Advisors Asset Management. "That being said, the 'cliff' is a serious situation that, until resolved, is likely to impede the Dow's progress beyond its recent highs around 13,600."

The Census Bureau reported Wednesday that housing starts declined to a seasonally adjusted annual rate of 861,000 in November from a downwardly revised 888,000 units in October. Economists, on average, had expected a rate of 873,000.

Building permits rose to a pace of 899,000 in November from an upwardly revised 868,000 in October. Expectations called for 875,000.

"Housing starts were slightly lower than expected while the level of building permits -- a useful gauge of the future health of the housing market -- rose to the strongest since July 2008," noted Andrew Wilkinson, chief economic strategist at Miller Tabak. "The level of starts fell for the first time in three months yet there is little question about the momentum that has characterized the homebuilding market for more than two years."

Gold for February delivery settled down $3 at $1,667.70 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts closed up $1.58 at $89.98 a barrel.

The benchmark 10-year Treasury climbed 5/32 to dilute the yield to 1.805%. The dollar was slipping 0.01%, according to the U.S. dollar index.

In corporate news, UBS (UBS), the Swiss bank, admitted to fraud, agreeing Wednesday to pay about $1.5 billion in fines in the Libor rate-rigging scandal. Shares were off 1.2%.

Oracle (ORCL) reported fiscal second-quarter earnings that topped Wall Street estimates. Shares tacked on more than 3.7%.

Shipping giant FedEx (FDX) missed Wall Street estimates as net income fell due to persistent global weakness and the impact of Hurricane Sandy. Nevertheless, shares rose 0.91%.

Getco will buy Knight Capital Group (KCG) for about $2 billion after sweetening its offer for the market-maker, Reuters reported, citing people close to the deal. Shares of Knight Capital surged 5.4%.

General Mills (GIS) on Wednesday posted second-quarter profit of 86 cents a share on revenue of $4.88 billion, beating the bottom-line estimate of 79 cents a share and matching top-line expectations amid good performance by each of the company's operating segments. Shares were down 1.2%.

SPX (SPW) is close to buying rival Gardner Denver (GDI) for about $4.2 billion, as it makes progress in securing financing, a source familiar with the matter told Reuters.

A deal could value Gardner Denver at about $85 share. SPX shares closed up 0.77%, while Gardner Denver shares popped 3.2%.

Stimuvax, an experimental cancer immunotherapy from Merck KGaA and Oncothyreon (ONTY), failed to improve survival in a late-stage study of non-small cell lung cancer patients, the companies announced Wednesday. Oncothyreon shares plummeted 51.3%.

Delphi Automotive (DLPH) replaces Titanium Metals (TIE) in the S&P 500 index after the close on Friday. Delphi shares spiked 3.5%.

Automotive interiors provider Johnson Controls (JCI) provided fiscal 2013 sales and profit guidance that topped current expectations. Shares rose 1.9%.

General Motors (GM) said Wednesday it will buy 200 million shares of common stock held by the U.S. Treasury for $5.5 billion, or $27.50 a share. Shares climbed 6.6%.

Navistar International (NAV), the manufacturer of international brand commercial and military trucks, posted a steeper-than-forecast fourth-quarter loss as revenue declined by 24%. Shares tumbled 8.5%.

-- Written by Andrea Tse and Joe Deaux in New York.



>To contact the writer of this article, click here: Andrea Tse.

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