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U.S. stocks fall as fiscal cliff negotiations and Apple outweigh economic data

TradingPub Admin | December 14, 2012

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Strong economic data generally provides a boon for stocks. However, December 14 was not a typical day for U.S. equities. During the day's trading, the boost generated by this data was outweighed by plunging Apple Inc. shares and fiscal cliff negotiations.

Falling Stocks 

The blue-chip Standard & Poor’s 500 Index dropped 0.4 percent to close at 1,413.71 at 4 p.m. New York time. This group of stocks has been widely monitored as a means of signaling the impact that existing economic events are having on the sentiment of investors, according to Bloomberg.

Data compiled by the media outlet dating back to 1928 reveals that that S&P 500 has crept up slightly to return 0.2 percent in December, and this figure is far behind the gain of 1.5 percent it has created on average during the period.

Budget Negotiations

Investor sentiment has been soured by continual wrangling between Washington lawmakers. Stocks were impacted after the election resulted in President Barack Obama maintaining his office and the House of Representatives continuing to be controlled by the Republicans. This situation was thought of by many as creating a standoff between these two top lawmakers.

In order to prevent more than $600 billion worth of tax increases and budget reductions from going into effect in 2013, lawmakers have until the end of 2012 to come to an agreement on how they will create new tax revenue and also reduce government spending.

The impact of failing to do so is expected by many to have a significant adverse effect on the economy, and the nonpartisan Congressional Budget Office has predicted that the fiscal cliff would push the U.S. into recession in 2013.

With two weeks left, market observers are becoming worried about the ability of lawmakers to resolve their budget concerns.

"The chances of some type of grand bargain in Washington are significantly diminishing as time passes," Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4.5 billion in Raleigh, North Carolina, told the news source. "On a company level, investors are looking at the competitive landscape for Apple and they see threats."

Apple Woes 

Shares of consumer technology giant Apple Inc. plummeted 3.8 percent as financial services firm UBS AG reduced its share-price estimate, according to Bloomberg. The company's stock has plunged 25 percent to $529.69 after reaching an all-time high in September.

The cost of options for Apple has surged to its highest in four years relative to its competitors, which coincides with worries that the consumer technology giant may face threats from competitors, the media outlet reports.

The options trading "is a reflection of market participants being a little bit more skeptical of Apple's story going forward," John Goltermann, who contributes to the management of $850 million at Aspen, Colorado-based Obermeyer Asset Management Inc., told the news source during a telephone interview on December 12. "The market is questioning what's next on the innovation side and how they're going to protect their margin."

Economic Data 

It was a strong day for Chinese manufacturing, as a measure of this activity released by HSBC Holdings Plc and Markit Economics surpassed the estimates of market experts, the media outlet reports.

This data supports the hope of many market participants that China's economy will experience a soft landing, Michael Strauss, who contributes to the management of around $26 billion as chief investment strategist at Wilton, Connecticut-based Commonfund, told the news source during a phone interview.

He said that while this economic data is a boon to asset markets, investors are preoccupied with the possibility of the fiscal cliff, and the budget negotiations may not be resolved until the final hour.

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