Wall Street rallies on fiscal hopes; Spain hits euro

NEW YORK Thu Dec 6, 2012 3:07am IST

1 of 6. A general view of the German stock exchange in Frankfurt November 7, 2012.

Credit: Reuters/Lisi Niesner

Stocks

   
Border Security Force (BSF) soldiers ride their camels as they rehearse for the "Beating the Retreat" ceremony in New Delhi January 27, 2015. REUTERS/Ahmad Masood

"Beating The Retreat" Rehearsals

Rehearsals are on for "Beating the Retreat" ceremony which symbolises retreat after a day on the battlefield, and marks the official end of the Republic Day celebrations.  Slideshow 

NEW YORK (Reuters) - U.S. stocks rose on Wednesday after President Barack Obama said a deal to avert the looming fiscal cliff was possible within a week, while the euro slipped after a disappointing Spanish bond auction.

A more than 6 percent drop in tech giant Apple made for the stock's worst day in almost four years and constrained Wall Street's gains. The Nasdaq fared worse than the other indexes as a result.

Investors continued to keenly monitor any progress in talks to avoid the so-called fiscal cliff of year-end tax hikes and spending cuts. Obama said an agreement could be reached in a week if Republicans compromise on taxes.

"Just the idea that we could have some kind of timeline is enough to eliminate some of the concerns," said Todd Schoenberger, managing partner at LandColt Capital in New York

"The fiscal cliff is the headline driver, so anything even slightly positive will move markets."

Both Republicans and Democrats dug in on the talks, urging quick action but still offering no compromises.

Economists say the $600 billion in tax hikes and spending reductions that will start to go into effect at the beginning of next year could send the economy back into recession if politicians don't come to an agreement to avoid it.

The euro fell after hitting a seven-week high against the dollar in early trading, stung by the disappointing Spanish bond sale and weak euro zone economic data. The euro was down at $1.31.

Investors also held off taking aggressive bets ahead of the European Central Bank's policy meeting on Thursday, which will be watched for any signs on next year's policy path.

"The euro is struggling to hold its ground ahead of the European Central Bank interest rate decision amid the negative developments coming out of the region," said David Song, currency analyst at DailyFX in New York.

"The single currency may continue to give back the rebound from the previous month as the fundamental outlook for the euro area deteriorates."

Bond markets also reacted poorly to the auction, with Spanish 10-year yields rising to 5.41 percent after demand for the sale was below expectations.

Euro zone experts still expect Madrid to request a sovereign bailout that would pave the way for the ECB to buy its debt, but doubts have started to creep in again following a drop in tensions and yields in recent weeks.

The Dow Jones industrial average .DJI finished up 82.71 points, or 0.64 percent, at 13,034.49. The Standard & Poor's 500 Index .SPX gained 2.23 points, or 0.16 percent, to 1,409.28. The Nasdaq Composite Index .IXIC dropped 22.99 points, or 0.77 percent, to 2,973.70.

Apple (AAPL.O) was the biggest drag on the Nasdaq, giving up 6.4 percent to $538.79. Analysts cited a variety of factors, including increasing competition in the tablet market.

The FTSEurofirst 300 index .FTEU3 closed up 0.3 percent and, the MSCI index of world stocks .MIWD00000PUS rose 0.2 percent.

A mixed batch of business and retail data showed euro zone shoppers cut back on spending by the biggest margin in six months in October, while purchasing manager figures pointed to another quarter of recession.

"The economic data pretty much confirmed the (euro zone) economy is still in a very weak state," said Rabobank economist Elwin de Groot.

In the United States, private payrolls processor ADP reported that private-sector employers added 118,000 jobs in November, fewer than expected as Superstorm Sandy took a toll on hiring, though activity in the service sector continued to expand.

Wednesday's other main economic event in Europe came in Britain, where finance minister George Osborne warned that growth will be weaker than expected and that he will have to break a key debt promise.

Britain's economy was now forecast to grow by only 1.2 percent in 2013, down from the 2 percent rate predicted in March.

(Additional reporting by Marc Jones in London and Ryan Vlastelica and Wanfeng Zhou in New York; Editing by Leslie Adler)

Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Reuters Showcase

Vodafone Ruling

Vodafone Ruling

Government will not appeal Vodafone tax ruling   Full Article 

Indian Railways

Indian Railways

Private refiners compete with state firm to sell diesel to railways   Full Article 

Ranbaxy Results

Ranbaxy Results

Dec-quarter net loss widens on forex loss  Full Article 

Market Eye

Market Eye

Sensex, Nifty retreat from record highs on profit-taking.  Full Article 

Tech Talk

Tech Talk

Apple takes high road in China smartphone standoff with Xiaomi.  Full Article 

Business Strategy

Business Strategy

Uber scraps commissions for its New Delhi taxis.  Full Article 

Job Cuts

Job Cuts

Sony to cut 1,000 jobs in smartphone business - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage