NEW YORK: Stocks ended with modest gains Friday as a report that had consumer sentiment rising to the highest level in more than five years offset post-election worries about the so-called fiscal cliff facing the federal government.
But the three major stock indexes posted declines for the week, with the Standard & Poor’s 500 and the Dow Jones industrials suffering their worst week since June 1 as measured by their weekly percentage drops.
“It’s hard to be enthusiastic buyers with uncertainty out there,” said David Kelly, chief market strategist at JPMorgan Funds.
After a choppy trading session, the Dow Jones industrial average rose 4.07 points to end at 12,815.39, but it dropped 2.1 percent for the week.
This was the Dow’s third consecutive week of losses.
Boeing Inc. and Caterpillar Inc. were the top gainers in the blue-chip index, rising 3.2 percent and 1.5 percent, respectively.
Walt Disney Co.’s shares fell 6 percent, making the media conglomerate the biggest loser in the Dow and the S&P 500 after its quarterly revenue missed estimates.
The S&P 500 climbed 2.34 points, or 0.2 percent, to end at 1,379.85, but it declined 2.4 percent for the week.
The Nasdaq composite added 9.29 points, or 0.3 percent, to end at 2,904.87, but it dropped 2.6 percent for the week, posting its fifth consecutive week of losses.
Stock indexes recovered from what began as a third down session after preliminary data from the University of Michigan/Thomson Reuters that showed consumer sentiment rising to 84.9 in November, a level not seen since 2007.
“The psychology of this cliff is actually much more dangerous than functionally living in a couple of quarters of sequestration or increased taxes. How much real corporate spending does not happen between now and cutting a deal?” said Art Hogan, a market strategist at Lazard Capital Markets.
The market’s positive reaction to the confidence data is a marked shift, said Hogan, who added that “for the better part of two weeks, economic data was very steady and constructive, and earnings a major disappointment, and we’ve been ignoring economic data” to focus on earnings.
On Friday afternoon, President Barack Obama addressed the fiscal cliff, the now-common phrase for automatic tax increases and cuts in government spending scheduled to start in January should lawmakers not reach a deficit-cutting deal.
In his first public remarks since his victory speech early Wednesday, the president called on the House of Representatives to quickly pass an extension of middle-class tax cuts for those earning less than $250,000.
Obama also invited top Democratic and Republican leaders in Congress to the White House next week to start discussions on averting the cliff.
Ahead of the president, House Speaker John Boehner, R-West Chester, urged the adoption of a simpler, “fairer tax code,” and said he was not looking to lock himself or anyone else in before deficit-cutting negotiations resume.
JPMorgan’s Kelly cautioned individual investors from getting overwrought about the fiscal cliff.
In Kelly’s view, there are only three plausible outcomes: an early deal, a just-in-time deal or a late deal. “You can make the short-term forecast of volatility and down while this goes on, but how sure are you that you’re going to catch that wave up” once a compromise is reached, he said.
Disappointing earnings reports from companies including retailer J.C. Penney Co. Inc. and daily-deals website Groupon Inc. weighed on sentiment.
“It isn’t a pretty picture. Indeed, it’s the worst quarter since [the fourth quarter of 2008],” Ed Yardeni, chief investment strategist at Yardeni Research Inc., wrote in a research note.
“The 2012 and 2013 estimates did edge down to new lows of $103.07 per share and $114.37, respectively. Yet S&P 500 forward earnings remained at a new cyclical high during the month,” he said.