The last day of 2012 was the best last day of a trading year ever, at least as far as the Dow is concerned which tacked on an additional 166 points on increasing optimism over a fiscal cliff solution. Trading resumed on Wednesday after New Years with a bang, as the markets reacted to the long-awaited, if not tardy, fiscal cliff solution from Congress. The 308 point Dow gain was its largest ever for the first trading day of a year. The rally stopped on Thursday following news that some Fed Reserve members are in favor of ending its bond-buying initiative to stimulate the economy. Still, the day’s losses were minimal. On Friday, stocks continued their upward trek on a job report that met expectations. The US unemployment rate rose marginally from 7.7% to 7.8%. The Dow finished at a 5-year high.
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Stocks logged a healthy 1% gain on Monday after news spread that US House Speaker John Boehner proposed a fiscal plan that included a tax rate increase, a first for the Republican side during the fiscal cliff discussions. Th Dow added an additional 100+ points on Tuesday, as further progress in fiscal cliff talks were made. On Wednesday the market gave back most of Tuesday’s gains when fiscal cliff talks stalled, as President Obama indicated he would veto Boehner’s “Plan B” that would raise taxes only on households earning more than $1 million. The major indexes experienced moderate gain on Thursday on positive economic news on several fronts. Third quarter GDP was revised up to 3.1%, November existing home sales rose more than expected, and the Philly Fed index of business activity increased much more than expected. Fiscal cliff concerns returned on Friday as a last-minute deal has not yet been struck by Washington. The Dow dropped 120 points as a result.
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On Monday, the major indexes traded in a narrow range around the unchanged mark as investors continue to wait for progress to be made in fiscal cliff talks. Despite marginally bad wholesale inventory and business optimism index reports, stocks enjoyed a strong showing on Tuesday, as the Dow moved back above the mark it held on election day last month. On Wednesday the Dow extended its winning streak to six sessions, albeit with a very tiny gain, despite the Fed’s announcement that interest rates would remain very low as long as the unemployment rate stays above 6.5%. A larger than expected drop in jobless claims failed to spark the market on Thursday, as moderate losses brought stocks down. The week ended on Friday on another down note as the S&P 500 lost its weekly gains despite a lack of bad news on the day.
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The Dow and S&P 500 receded half a percent on Monday on a surprising drop in a Institute of Supply Management manufacturing report. On Tuesday, the major indexes were stagnant on no major economic news. Rising optimism over a deal being reached to avoid a fiscal cliff propelled stocks upward on Wednesday. On Thursday stocks tacked on further gains as weekly jobless claims fell more than expected. The week concluded on Friday with another win for the Dow and S&P 500 as the US unemployment rate dipped to 7.7% from 7.9%.
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