BackStocks close flat; futures turn higher on tax deal
Stocks close flat; futures turn higher on tax deal
PremiumNew York: Worries about Europe’s debt crisis frustrated investors looking for a reason to take stocks to new highs for the year as the major indexes ended flat on Monday.
But stock futures edged higher after US President Barack Obama said he had reached an agreement with Republicans on how to extend expiring tax cuts.
“In a nutshell, this is precisely the kind of conversation the Street was expecting from Washington - it is clearly compromise," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
“It was absolutely no surprise at all, and it will not hurt the market. I doubt that it will help a great deal, but it certainly leaves the market undisturbed."
Even with a slight decline in the S&P 500, analysts still see the benchmark index soon breaking out of its recent range and surpassing its current intraday high for the year just above 1,227 reached on 5 November. Technology shares limited losses, and the Nasdaq advanced on positive brokerage comments on Cisco Systems and Cognizant Technology Solutions Corp.
In Europe, Germany rejected attempts by euro-zone finance ministers to increase the size of a €750 billion ($1 trillion) safety net for debt-stricken members.
A drop in the euro limited stocks’ advance as the two have moved in a tight correlation recently, with the euro acting as a proxy for debt concerns overseas.
Further adding to conflicting sentiment were downbeat comments from US Federal Reserve chairman Ben Bernanke, which outweighed his attempts to reassure markets the Fed could potentially boost the planned size of its stimulus efforts if necessary.
“I was listening to the tone of his voice - the tone of his voice made me nervous. As a trader and a manager, it made me nervous," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
“I think he was trying to sell the American people, because he has been under pressure."
Cisco rose 1.9% to $19.43 after Oppenheimer raised its rating on the stock to “outperform," and Cognizant added 0.7% to $69.80 after Goldman Sachs boosted it to “buy."
Analysts view key resistance for the benchmark S&P 500 at 1,228 because it’s just above the year’s high and coincides with the 61.8% Fibonacci retracement of the 2007-2009 bear market slide.
“If the (euro) problem is again pushed forward and that relief comes off the market, the market will probably push higher here towards new highs into year-end," Mendelsohn added.
Also looking ahead in equities, Goldman Sachs Asset Management Chairman Jim O’Neill, speaking at the Reuters 2011 Investment Outlook Summit in New York, gave a bullish view on stocks, saying global equity markets are likely to see gains of up to 20% through 2011.
The Dow Jones industrial average dropped 19.90 points, or 0.17%, to end at 11,362.19. The Standard & Poor’s 500 Index shed 1.59 points, or 0.13%, to 1,223.12. But the Nasdaq Composite Index gained 3.46 points, or 0.13%, to 2,594.92.
Volume was light with about 6.27 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below the year-to-date average of 8.62 billion.
In corporate news, Pfizer announced it was replacing CEO Jeffrey Kindler with Ian Read, who heads the company’s global pharma operations. Shares rose almost 2% in morning trade.
Declining stocks slightly outnumbered advancing ones on the NYSE by 1,502 to 1,464, while on the Nasdaq, advancers beat decliners by a ratio of about 4 to 3.
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