US stocks fell in early trade but later finished slightly higher on the day as energy stocks surged on the sharp rise in oil prices. Retailers lost ground on concerns about the crucial holiday shopping period and homebuilders were volatile after US house prices declined by a record amount.
Investors hoping for a “Santa Claus rally” were disappointed with the financial and consumer discretionary sectors bearing the brunt of selling pressure.
By the close of trade in New York, the S&P 500 was up 0.1 per cent at 1,497.66, having earlier fallen as much as 0.6 per cent. The Dow Jones Industrial Average was a fraction higher at 13,551.69 while the Nasdaq Composite rose 0.4 per cent to 2,724.41, as technology once again outperformed the broader market.
The retail sector declined after a report by MasterCard Advisors said consumer spending climbed only 3.6 per cent between Thanksgiving and Christmas, adding to concerns that US consumers, hit by the housing market slump, are shying away from the shops. Excluding petrol and car sales, spending increased only 2.4 per cent.
Among the leading fallers were Macy’s and Dillard’s, the department store operators, which fell 3.9 per cent to $25.95 and 5.5 per cent to $19.19 respectively.
Shares in Target, the discount retailer, fell 2.5 per cent to $51.16 after it warned that sales may decline this month.
The company set guidance for December same-store sales of between a 1 per cent decrease and 1 per cent increase, compared to previous expectations of 3-5 per cent growth.
Adrianne Shapira, analyst at Goldman Sachs, said Target’s guidance “stokes the fears of disappointing December sales.”
Economic news was dominated by a record decline in US house prices. The average price of single-family homes in 10 metropolitan areas covered by the Standard & Poor’s/Case-Shiller home price index fell 6.7 per cent in October compared with a year earlier.
The S&P homebuilder index fell 1.9 per cent after the report was released but recovered later to trade 0.6 per cent higher at 377.61.
Elsewhere on Wall Street, Merrill Lynch also fell in early trade before rallying 1.2 per cent to end at $54.54. Meredith Whitney, CIBC World Markets analyst, said she expects the bank to post a $2.70-a-share loss for the fourth quarter, with writedowns reaching up to $7bn.
Merrill on Monday said it would receive up to $6.2bn in new capital from Singapore’s Temasek Holdings and Davis Selected Advisers, a money management firm, but the stock fell after Merrill said the stakes were acquired at a sharp discount to the previous closing price. Davis Selected Advisers, also moved shares in MBIA on Wednesday after it disclosed a 6.4 per cent stake in the bond insurer. MBIA’s shares rose 11 per cent to $22.33.
There was also good news for investors looking for a pick-up in dealmaking activity after Berkshire Hathaway, the conglomerate run by the billionaire investor Warren Buffett, said it planned to buy a 60 per cent stake in Marmon Holdings.
Berkshire Hathway will pay $4.5bn for its stake in the family-controlled manufacturing and services group and will acquire the remaining 40 per cent over the next five to six years.
Commodity prices rose on Wednesday, providing a boost to energy and mining stocks. Hess, the oil producer and refiner, rose 2.2 per cent to $104.63 while Newmont Mining, the world’s largest gold producer, climbed 1.4 per cent to $49.11.
Supply concerns drove the price of crude oil to a one-month high of $96.54 while gold climbed 2 per cent to $824.60 an ounce.
Bond prices edged lower on Wednesday. The yield on the two-year Treasury note gained 2 basis points to 3.26 per cent while the 10-year Treasury note yield was up 0.5bp at 4.21 per cent.
The dollar was mixed against major currencies early in New York. The US currency lost 0.6 per cent against the euro and fell 0.5 per cent against the Swiss franc but rose slightly against the yen.
US stocks rose on Monday after a spate of deal-making helped spur a pre-Christmas rally on Wall Street.
The S&P 500 on Monday closed up 0.8 per cent at 1,496.45, the Dow Jones Industrial Average gained 0.7 per cent to 13,549.33, and the Nasdaq Composite put on 0.8 per cent to 2,713.50. Equity markets were closed on Tuesday for the Christmas holiday.
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