The showdown in Washington over the so-called “fiscal cliff” gave US stocks another volatile week, but the apparent political stalemate — just weeks before a potentially devastating fiscal crunch — was not the defining market issue.
The key indices had diverged sharply by Friday, with the explanation simple: Apple Inc.
The iPhone and iPad maker, the world’s largest company by market capitalization, lost 8.9 percent in the week, ending at US$533.25, down US$52.
It was Apple’s weight that pulled the NASDAQ Composite down 1.07 percent to 2,978.04.
Meanwhile, the Dow Jones Industrial Average closed the week at 13,155.13, up 0.99 percent, as the broad-based S&P 500, which includes components from both, came in with an 0.13 percent gain to 1,418.07.
Apple’s fall, including a stunning 6.4 percent loss on Wednesday — the worst one-day drop in four years — accelerated the decline from its peak above US$700 in September.
Analysts have begun raising doubts the market darling can keep up the astounding growth performance it has delivered in past years, especially as agile competitors challenge its leading cellphones and tablets.
Stripped of Apple, stocks seemed somewhat immune to the fight over the fiscal cliff, the US$500 billion in tax hikes and spending cuts slated to come in beginning Jan. 1 that could send the US economy back to recession.
The cliff issue did not go away: by the end of the week, there was little sign that US President Barack Obama and US Congressional Republicans had found common ground on which to avert the cliff.
Still, financials rose 1.1 percent in the week, while capital goods increased by 0.4 percent, big industrial groups 1.3 percent and energy companies 0.8 percent.
Dozens more companies were taking action because of the fight — moving forward dividend payments and announcing hefty special payouts to avoid higher dividend taxes likely to come after Jan. 1.
Analysts expect the cliff fight to have more of a negative impact on the market in the coming week if there is no sign of compromise between Republicans and Democrats on the key issues.
Otherwise, the focus will be on the US Federal Reserve’s last policy meeting of the year on Tuesday and Wednesday, with an announcement set to be made on Wednesday.
With last month’s job creation data still unimpressive — even if the unemployment rate fell to 7.7 percent — the Fed is expected to hold firm on its ultra-low rates policy and expand its outright bond purchase program to make up for the expiration of its Operation Twist intervention.
The replacement purchases would likely be about US$45 billion a month, taking total Fed action aimed at pressing down long-term interest rates to US$85 billion a month, he said.
Key data releases over the coming week include the trade balance in October (on Tuesday), import prices (on Wednesday); retail sales and producer prices for last month (on Thursday); and consumer prices (on Friday).