Reports of behind-the-scenes negotiations to resolve the "fiscal cliff" situation helped reverse a sharp decline in stocks on Thursday.
The Dow Jones Industrial Average, down 150 points in early trading, finished with a loss of just 18.28 points to 13,096.31. The Nasdaq Composite Index fell 4.25 points to 2,985.91, and the S&P 500 Stock Index was down 1.73 points to 1,418.10.
Economic news was mostly positive. The Labor Department reported initial claims for jobless benefits fell 12,000 in the week ended Dec. 22 to 350,000. The Commerce Department said new home sales rose by 4.4 percent in November to an annualized rate of 377,000 units, the highest number since April 2010.
Commodities were little changed. Gold rose $3 to $1,663.70 an ounce, and oil fell 11 cents to $90.87 a barrel.
Consumer discretionary and staples stocks reversed declines, each climbing 0.1 percent among 10 groups in the Standard & Poor’s 500 Index. Bank of America Corp. (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM) slid at least 0.6 percent, pacing losses among financial shares.
“This market has held up remarkably well recognizing that this is political theater and that there is a decent chance that some bridge will be built at the last minute,” said Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pa. His firm oversees $6.5 billion in assets. “Dec. 30 is a Sunday. They’re making all of this extra effort to save the day at the last minute.”
The S&P 500 has slipped 0.8 percent this week as talks between President Barack Obama and Congress dragged on beyond the Christmas holiday. The gauge has still rallied 13 percent this year. Obama is pushing lawmakers to agree on an interim deal to avert more than $600 billion of automatic tax increases and spending cuts, known as the fiscal cliff, which will otherwise come into effect next month.
Stocks tumbled earlier Thursday after Senate Majority Leader Harry Reid said a resolution to the dispute before Tuesday appears unlikely because Republicans won’t cooperate. Equities pared losses as House Majority Leader Eric Cantor said Thursday in a message posted on Twitter that the House will convene Sunday evening. Neither Cantor nor two aides, who first disclosed plans for the session while speaking anonymously, said what action the House plans to take.
Treasury Secretary Timothy Geithner wrote in a letter to Congress Wednesday that the federal debt limit will be reached on Monday and his department will begin using “extraordinary measures” to finance $200 billion in deficits in early 2013.
“The markets remain held hostage to the perceived negotiations in Washington regarding the fiscal cliff,” said Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion. “It’s our take that there are talks going on and that they’re substantive, but time is growing short.”
Consumer discretionary stocks advanced the most out of 10 S&P 500 groups Thursday after earlier falling as much as 1.3 percent. Expedia Inc. (Nasdaq: EXPE) rallied 4.1 percent to $60.30. The online travel-booking service is buying a majority stake in German hotel booking and search site Trivago for about $630 million in cash and stock, according to a Dec. 21 joint press release.
J.C. Penney Co. (NYSE: JCP) slumped 5.9 percent to $19.52 for the biggest drop in the benchmark U.S. equity index.
Marvell Technology Group Ltd. (Nasdaq: MRVL) fell 3.5 percent to $7.14 after the stock was cut to "market perform" from "market outperform" by JMP Securities LLC (NYSE: JMP), which cited numerous headwinds. The maker of chips for computers and mobile phones tumbled 10 percent Wednesday as a U.S. jury ordered it to pay $1.17 billion, a penalty that may be tripled, for infringing patents on integrated-circuit technology held by Carnegie Mellon University.
Smith & Wesson Holding Corp. (Nasdaq: SWHC) advanced 3.8 percent to $8.26 as the gunmaker expanded its stock repurchase program by $15 million. The shares have lost 13 percent since the day before a gunman killed 20 students in a Connecticut elementary school on Dec. 14. The stock closed at $11.02 at the end of September.