By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks on Tuesday closed nearly
unchanged after a two-session surge as Federal Reserve Chairman Ben
Bernanke urged lawmakers to make a deal and end uncertainty over
the so-called fiscal cliff of scheduled spending cuts and tax
hikes.
"This is a classic fear-driven market. It seems like people in
Washington are much more willing to play nice together, but a lot
of folks on Main Street and Wall Street just don't trust them yet,"
said Robert Pavlik, chief market strategist at Banyan Partners
LLC.
The Dow Jones Industrial Average (DJI) fell 7.45 points, or less
than 0.1%, to 12,788.51, with Hewlett-Packard Co. (HPQ) pacing
losses that included 12 of the index's 30 components.
H-P's shares skidded 12% after the Dow component reported
fourth-quarter revenue below expectations and earnings above
estimates, but only after excluding a large accounting charge tied
to alleged fraud by an acquired company.
The S&P 500 index (SPX) rose nearly 1 point to 1,387.81,
with technology the poorest performer and health care faring the
best among the 10 industry groups.
The Nasdaq Composite (RIXF) added 0.61 point to 2,916.68.
Advancers edged just ahead of decliners on the New York Stock
Exchange, where 641 million shares traded. Composite volume neared
3.2 billion.
Oversold on hope?
In a speech Tuesday afternoon in New York, Bernanke said
Washington needs to resolve the uncertainty over U.S. tax and
spending policy weighing on consumers, businesses and markets.
The Fed chief's reiteration of the threat and his repeating his
assertion that the central bank does not have the tools to offset
the economic harm the cliff represents is a "reminder once again
that yesterday was a hope trade, and we're taking some of the hope
trade off today," said Mark Luschini, chief investment strategist
at Janney Montgomery Scott.
"What's holding the market hostage at the moment is the fiscal
cliff, every day all day," said Luschini.
"With Congress set to end its session in mid-December, the fuse
is getting increasingly short," he added of the time remaining for
a deal to avert automatic tax hikes and spending cuts scheduled to
begin in January.
"The market is seesawing between what can actually happen this
year and what can happen beginning next year. I've been saying all
along that some type of resolution will probably be put into place
early on next year," said Pavlik.
Stocks on Monday rallied for a second session on optimism that
President Barack Obama and congressional leaders would reach
agreement on averting the tax hikes and spending cuts otherwise
known as the fiscal cliff.
"We had a big rally yesterday; that may have been the result of
an oversold condition," said Bruce Bittles, chief investment
strategist at Robert W. Baird & Co.
"I'm a little concerned about yesterday -- we had a lot of
optimism all of a sudden based on some discussion that the fiscal
cliff could be resolved before year-end. And the consensus seems to
be that what is going on in the Middle East is not all that
troubling, as well," Bittles said.
On Tuesday, Egypt's president reportedly said a week of fighting
between Israel and Palestinian groups in the Gaza Strip would come
to a halt later in the day. The comments came as Secretary of State
Hillary Clinton headed to the Middle East to take part in truce
talks.
Oil prices fell for the first session in three, with crude
futures sliding $2.53, or 2.8%, to $86.75 a barrel.
Best Buy Co. (BBY) fell after the consumer-electronics retailer
reported a $10 million loss for the third quarter on
weaker-than-expected sales at its established stores.
The Commerce Department said construction of new homes
unexpectedly rose to the highest in more than four years in
October. Economists polled by MarketWatch had anticipated a
decline, due in part to superstorm Sandy.
"The housing industry is getting better to the benefit of the
balance sheets of the American consumer and banking system,"
emailed Peter Boockvar, equity strategist at Miller Tabak &
Co.
A day after Moody's Investors Service lowered France's top
credit ranking, European finance ministers are meeting in an effort
to shore up Greece's finances.
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