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Dow Reclaims 13K on Hopes for a Budget Deal; Tech Sits Out the Rally

The COMP breached its 10-day trendline for the first time since Nov. 16

by 12/5/2012 4:15:00 PM
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It looked like another seesaw session until just before midday, when the Dow Jones Industrial Average (DJI) ascended to a triple-digit lead. President Barack Obama said the fiscal-cliff crisis could be resolved "in about a week," should Republicans agree to tax hikes for the wealthy, though House Speaker John Boehner, R-Ohio, told the commander in chief to put his money where his mouth is, stating, "We can't negotiate with ourselves." Nevertheless, hopes for a budget deal ushered the blue chips into the black, as did encouraging data on factory orders and the services sector. Furthermore, the optimism helped to overshadow a lackluster update from payroll giant Automatic Data Processing (ADP), which is often viewed as a precursor to Friday's highly anticipated nonfarm payrolls report.

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The Dow Jones Industrial Average (DJIA) explored a range of more than 165 points, peaking at the 13,089.11 level in afternoon trading. By the close, the blue-chip barometer pared its gain to 82.7 points, or 0.6%, to end back atop the 13,000 level and its 200-day moving average. Just eight of the Dow's 30 components bucked the trend higher, led by a 0.6% drop from Intel (NASDAQ:INTC). Meanwhile, Bank of America (NYSE:BAC) paced the 22 advancing equities, soaring 5.7% to land in double-digit territory.

The S&P 500 Index (SPX) also erased its early deficit, tacking on 2.2 points, or 0.2%. On the other hand, the tech-rich Nasdaq Composite (COMP) gave up nearly 23 points, or 0.8%, to end south of its 10-day trendline for the first time since Nov. 16.

The CBOE Market Volatility Index (VIX) settled around 3.9% lower, after running into a wall in the form of its 200-day moving average.

CLOSING SUMMARY  INDICES

CLOSING SUMMARY  NYSE AND NASDAQ

A Trader's Take

"The market was pretty mixed today, with the Dow up about 100 points and technology stocks actually trading in the red," said Senior Equity Analyst Joe Bell. "Apple (NASDAQ:AAPL) seemed to weigh heavily on the tech sector, as news hit that a clearing firm raised its margin requirement from 30% to 60%."

However, the iPhone maker wasn't the only stock in the news. "The big deal today was certainly Freeport-McMoRan Copper & Gold (NYSE:FCX) acquiring McMoRan Exploration (NYSE:MMR) and Plains Exploration & Production (NYSE:PXP) for a combined $20 billion," he added. "As the back-and-forth fiscal-cliff negotiations continue, it's a good sign that M&A activity continues to pick up as we near the end of the year."

Economic and Earnings News:

The private sector added 118,000 jobs in November, said ADP, down from a revised gain of 157,000 in October. Economists were looking for a bigger monthly increase of 125,000, but ADP estimated that Superstorm Sandy dented private payrolls by about 86,000 last month.

The Institute for Supply Management's (ISM) nonmanufacturing index rose to 54.7 in November, up from October's reading of 54.2. The monthly gain points to a faster rate of growth in the U.S. services sector. By contrast, economists had expected the index to pull back to 53.5.

Factory orders ticked up 0.8% in October to $477.58 billion, said the Commerce Department, defying expectations for a decrease of 0.1%. Excluding transportation, factory orders improved 1.3%. Meanwhile, orders for non-defense capital goods -- often viewed as a key gauge of business spending -- rose 2.9% for the month.

The Labor Department upwardly revised third-quarter nonfarm productivity to an annualized rate of 2.9%, sharply higher than its previous estimate of 1.9%. Unit labor costs dropped 1.9% for the July-September period, down from the initially reported decline of 0.1%. Economists, on average, expected productivity to climb 2.8% and unit labor costs to decrease 1.0%.

Optimism increased during the week ended Nov. 30, according to the latest survey by Investors Intelligence. The percentage of financial advisors with a bullish view on stocks jumped to 43.6% from 39.3%, while the percentage bearish slipped to 25.5% from 27.7%. The percentage anticipating a market correction pulled back to 30.9% from 33.0%.

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