The Star Online: Business
The Star Online: Business |
- Wall Street Week Ahead: "Cliff" worries may drive tax selling
- Dow, S&P rise on jobs, but Apple bites Nasdaq again
- Cash-rich Genting Singapore hopeful of Japan foray
| Wall Street Week Ahead: "Cliff" worries may drive tax selling Posted: 07 Dec 2012 11:09 PM PST NEW YORK: Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31. The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual. Tax-related selling may be behind the weaker trend in the shares of market leader Apple Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes. "Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual." Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions. The rush to avoid higher taxes on portfolio gains could cause additional weakness. The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions. A PAIN PILL FROM THE FED? Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year. Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard. "After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York. "I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said. MORE VOLUME AND VOLATILITY Volume could increase as investors try to shift positions before year end, some analysts said. While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist. Volatility could pick up as well, and some of that is already being seen in Apple's stock. "The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York. Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38. "There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said. While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come. Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end. "Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said. - Reuters
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| Dow, S&P rise on jobs, but Apple bites Nasdaq again Posted: 07 Dec 2012 11:06 PM PST NEW YORK: The Dow and the S&P 500 advanced modestly on Friday, though another sell-off in Apple depressed technology shares and kept the Nasdaq negative, overshadowing a sharply better-than-expected jobs report. Trading was light, continuing the week's trend of slight moves and anemic volume. The S&P 500 ended up a mere 0.1 percent for the week, following several volatile sessions that repeatedly pushed it in and out of positive territory. The benchmark index is just 3.8 percent below the 2012 intraday high of 1,474.51 reached in mid-September. Equities opened higher after the non-farm payrolls report, which showed 146,000 jobs added in November, far more than had been expected, while the U.S. unemployment rate dropped to 7.7 percent. A sour reading on consumer sentiment caused an erosion of those gains, though markets rebounded going into the close. The Thomson Reuters/University of Michigan's consumer sentiment index for early December fell to its lowest level since August. Sentiment fell on growing concerns over the "fiscal cliff" debates in Washington, which have been a major factor preventing broader moves as well. "We're not as concerned as we were a few months ago because of improvement like you can see in the employment number, but there's such a wild card over the cliff," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio. "There are such concerns about what could happen that markets will be overhung until a resolution is more certain." One of the biggest drags on the Nasdaq was Apple (AAPL.O) which fell 2.6 percent to $533.25, extending its losses for the week to 8.9 percent. This was the worst week for the stock since May 2010, and with the losses, the stock of the largest U.S. company by market value is now down 24.4 percent from an all-time intraday high reached in late September. In Friday's session, Apple's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38. The weakness drove the S&P information technology sector .GSPT lower. The index fell 0.6 percent and was the weakest of the S&P 500's 10 major industry sectors on Friday. The Dow Jones industrial average .DJI gained 81.09 points, or 0.62 percent, to 13,155.13 at the close. The Standard & Poor's 500 Index .SPX rose 4.13 points, or 0.29 percent, to 1,418.07. The Nasdaq Composite Index .IXIC slipped 11.23 points, or 0.38 percent, to close at 2,978.04. For the week, the Nasdaq is down 1.1 percent, hurt largely by the decline in Apple. The Dow, which does not count Apple as a component, rose 1 percent for its third straight week of gains. The S&P 500 is also up for three straight weeks, rising 4.3 percent over that period. The equity market has regained most of the ground it lost following President Barack Obama's re-election as markets turned their focus to the coming "fiscal cliff." Market response to the macroeconomic data remained muted as negotiations continued to command investor attention. U.S. House Speaker John Boehner said that talks this week with President Barack Obama produced no progress, and he renewed his demand that the president provide a new offer to avert the series of tax increases and spending cuts that are likely to hurt economic demand in 2013. Material shares .GSPM were the strongest performers of the day, with that index up 0.8 percent. Freeport-McMoRan Copper & Gold Co (FCX.N) gained 2.9 percent to $31.70 while Dow Chemical (DOW.N) added 2.2 percent to $30.30. Amarin Corp (AMRN.O) fell 18.9 percent to $9.69 after the biopharmaceutical company raised $100 million in financing to help it launch its heart drug, Vascepa, but disappointed investors, who had hoped for a sale or partnership. CombiMatrix Corp (CBMX.O) shares more than quadrupled, soaring 336.6 percent to $8.60 after the company said two studies published in a medical journal favored technology it uses for prenatal diagnosis of genetic abnormalities over traditional technologies. About 52 percent of shares listed on the New York Stock Exchange closed higher while slightly more than 50 percent of Nasdaq-listed stocks closed lower. Volume was light, with about 5.47 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.48 billion shares. - Reuters
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| Cash-rich Genting Singapore hopeful of Japan foray Posted: 07 Dec 2012 07:30 PM PST SINGAPORE: Gaming operator Genting Singapore is examining opportunities to enter Japan, where a new government is expected to pass legislation legalizing casinos in the next 12 months to 18 months, company executives said on Friday. The operator of the muti-billion dollar casino and entertainment complex Resorts World Sentosa in Singapore is looking to expand overseas at a time its casino in the city-state is facing headwinds from tighter regulations and slowing economic growth. Its gaming revenue fell 20 percent in the third quarter from a year ago. "I'm more optimistic on something happening in Japan than for the rest. We see some possible movement in terms of Japanese legislation," chairman of the Genting Group, Lim Kok Tay, said at a press conference. The Genting Group comprises Genting Berhad as the investment holding company and listed vehicles such as Genting Singapore, Genting Malaysia and Genting Hong Kong . Genting Hong Kong has applied to Australian regulators to raise its stake in Echo Entertainment Group to 25 percent from about 5 percent, potentially pitting it in a battle for the company against Australian billionaire James Packer, who owns a 10 percent stake. The group also operates the popular Genting Highlands casino complex near Kuala Lumpur and has invested in the Philippines and Vietnam, after missing out on a concession in Macau more than a decade ago. CHANGING POLITICAL WINDS? The Japanese government has been toying with the idea of changing the law to make casinos legal, but the process has been slowed by constant changes in its leadership. However, that may soon change with a parliamentary election later this month that is expected to see a win for the Liberal Democratic Party, which has supported legalising casinos. "We believe that some legislation will come along in the next 12-18 months," said Tan Hee Teck, Chief Operating Officer of Genting Singapore. The Genting executives did not provide any details on how exactly the group plans to foray into Japan or how much it is willing to invest. Japan is seen as an attractive market for Genting because of its large market size and potential for larger scale developments. "We believe if the Japanese government does legislate gaming, then they will be looking for large-scale integrated resorts," said group chairman Lim. Genting Singapore raised $2.3 billion through perpetual securities earlier this year, and had S$4.1 billion in cash as of end-September. In Singapore, the company is looking to build more hotels to overcome a shortage of hotel rooms to cater to the higher end of the mass market, which is a factor limiting Genting Singapore's growth, he said. A subsidiary of Genting Singapore earlier this month placed the top bid of S$238.2 million for a hotel site on the outskirts of the city-state. Shares of Genting Singapore have fallen 18 percent since the start of the year, making it the third-worst performing stock on the Straits Times Index. - Reuters
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