US stocks advance as ‘cliff’ threat fails to dim sentiment

Gains during week broad-based

NEW YORK, Dec 1, (Agencies): US stocks managed gains for a second straight week, as investors clung to a blind faith that politicians will resolve the looming fiscal cliff crunch.

The pending threat of higher capital gains and dividend taxes next year, whatever the resolution of the negotiations between Democrats and Republicans, failed to dim sentiment.

And some stocks, like Costco and Walmart, spurred higher because of it, as firms announced special dividends and moved forward regular payouts to before December 31, to avoid an expected increase in the tax rate.

The broad-based S&P 500 managed a 0.5 percent gain for the week, to end at 1,416.18. The Dow Jones Industrial Average of 30 blue chips gained 0.12 percent, to 13,025.58, while the Nasdaq Composite put on 1.46 percent, ending the week at 3,010.24.

Although the business and financial communities continued to warn Congress and the White House to reach a deal for averting the economy-crunching spending cuts and tax hikes of the socalled fiscal cliff, investors did not appear too worried.

Gains during the week were broadbased, with the crucial retail sector adding two percent on the back of solid sales at the beginning of the holiday shopping season.

Challenge

But weak data on consumer spending in the third quarter and the October to early November period — when the devastation from superstorm Sandy distorted the picture — made looking ahead a challenge.

“Between Sandy and the fiscal cliff, the pace of consumer spending and business investment is really unclear,” said Joel Naroff of Joel Naroff Economics.

“The implication is that the October and even November numbers have to be evaluated carefully and may not reflect the true nature of either the consumer or the economy.” “Given the noise from Washington and the fears of tax changes to come, movements in the equity markets during December may also bear no relation to underlying economic trends.”

Chris Low of FTN Financial said the markets were trading the headlines from Washington on nearly a minute to minute basis.

“The traders love volatility because that’s what generates their revenues, but for investors it is just frustrating.”

Economists said that, after third quarter growth was revised higher to a 2.7 percent annual pace, the signs are that the fourth quarter could slow to less than half that pace — especially as businesses hold back from investment due to fears over the fiscal cliff.

“Indeed, the Fed’s latest Beige Book report indicated that regional business