Fiscal Cliff Concerns And Poor Retail Sales Hit Wall Street

Fiscal Cliff concerns are poor retail sales are weighing heavily on the minds of traders on Wall Street. Volume was light, with investors only trading 2.17 billion shares on the combined stock markets of the New York Stock Exchange, the Nasdaq and the NYSE MKT, but the day after Christmas marked the third day of losses for the S&P 500 in its worst three-day decline since the Presidential Election.

Reuters reports on the damage being done by weaker than hoped Christmas retail sales:

“Holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year, according to data from MasterCard Advisors SpendingPulse. The Morgan Stanley retail index.MVR skidded 1.8 percent while the SPDR S&P Retail Trust (XRT.P) slipped 1.5 percent to 61.24.”

Rick Fier, director of trading at Conifer Securities in New York, told Reuters the Fiscal Cliff was to blame for these results:

“With the ‘fiscal cliff’ hanging over our heads, it was hard to convince people to shop, and now it’s hard to convince investors that there’s any reason to buy going into year-end.”

The potential damage was lessened somewhat since senior traders are still on their holiday-shortened Christmas vacation. Major European markets are also closed for the day. The good news is that the S&P 500 Index is up 12.8 percent for the year, which is the best annual gain since 2010.The stocks have recouped nearly all of the losses after the U.S. election, when the fiscal cliff was at the forefront of the headlines.

Another bit of good news is that historically during the last five trading days of the year, and the first two of next year, the S&P 500 has averaged an increase of 1.8 percent and risen 79 percent of the time. While the Fiscal Cliff is still a worry, this so-called “Santa rally” has investors like Conifer’s Fier, who helps oversee about $12 billion in assets, hedging their bets according to the Chicago Tribune:

“While it’s unlikely there could be a budget deal at any time, no one wants to get in front of that trade. Investors can easily make up for any gains when there’s more action in 2013.”

Did the Fiscal Cliff affect your Christmas gift spending?