As 2012 gets ready to close, confidence over a quick resolution to the fiscal cliff weighed on investors and consumer sentiment.
The Volatility Index has been rising higher as the Dec. 31 deadline approaches for when the U.S. heads over the fiscal cliff. The VIX, based on index option prices, is sometimes referred to as the fear index and represents an expectation of the stock market’s volatility over the next 30 days. On Thursday the VIX rose to 19.47, compared with 15.87 at the end of November.
If nothing is done, expect automatic tax increases and deep spending cuts that were agreed upon as part of the debt ceiling deal reached in 2011. This combined duo is expected to trigger a recession, although lawmakers can still work out a deal early in 2013 and make retroactive changes to the tax and spending laws scheduled to go into effect at midnight on Dec. 31.
There was debate Thursday on what President Obama, who cut short his vacation in Hawaii, intends to do to avoid some of the tax hikes and spending cuts. While Republicans said they were expecting details on a new, scaled-back plan that would be sent to Congress to get the parties negotiating again, the White House dampened that speculation, stating there are no plans to send a proposal to Capitol Hill. The Senate is back in Washington and the House will reconvene Sunday.
Earlier in the day, Sen. Majority Leader Harry Reid (D., Nev.) expressed doubt that a deal could be reached before the upcoming deadline, which sent U.S. equity markets into negative territory. He also called on House Speaker John Boehner (R., Ohio) to call members back from Christmas break.
The political gridlock in Washington is having a clear affect on consumer sentiment, with retailers pointing to the impending cliff as one reason Christmas sales were weaker than expected. The Consumer Confidence Index, a bellwether gauge of American sentiment every month, fell in December by six points.
The reading in December was 65.1, down from November’s 71.5. The expectations component fell the sharpest to 66.5 from 80.9, while the present situation portion rose to 62.8 from 57.4.
The expectations component, or the longer-term outlook, reflects consumer sentiment over the next six months. In contrast, the present situations component, which measures current conditions, is more than 16 points higher than it was in August, according to UBS chief economist Maury N. Harris.
Lynn Franco, director of economic indicators at The Conference Board, said, “Consumers’ expectations retreated sharply in December resulting in a decline in the overall index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions.”
October was the best month so far, with an overall index reading of 73.1 that hit a four-year high. November’s initial read of 73.7 was adjusted downward to 71.5 in the December report.
The Dow Jones Industrial Average hit an intraday low of 12,964.08 before gaining back some lost ground following the disclosure that the House will meet on Sunday, with the first House vote set for 6:30 p.m. What the House will vote on exactly wasn’t disclosed. The DJIA cut its loss to just a 0.1 percent decline to 13,096.31.
Among U.S. retail stocks, Bon-Ton Stores Inc. was the top performer, gaining 6.1 percent to close at $11.47. In the red was Pacific Sunwear of California Inc., whose shares lost 8.1 percent to close at $1.36.
In overseas trading, the market indices were mixed.
The Nikkei 225 in Tokyo rose 0.9 percent to 10,322.98, while the Hang Seng Index in Hong Kong inched up 0.4 percent to 22,619.78.
The European markets were flat on the first day of trading following the Christmas break.
As traders kept their eyes fixed on fiscal cliff talks in the U.S., the FTSE 100 in London was flat at 0 percent or 5,954.30 at the close of trading, the CAC 40 in Paris edged up 0.4 percent to 3,674.26, and the FTSE MIB in Milan rose 0.5 percent to 16,408.28. The DAX in Frankfurt, meanwhile, fell 0.2 percent to 7,655.88.
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)
@Pharrell and his wife Helen Lasichanh were among the stars that came out to celebrate @rimowa’s first pop-up concept shop. The space, which is located on Rodeo Drive in Beverly Hills, draws inspiration from airport luggage carousels and lounge areas – and features the company’s luggage and accessories. If the pop-up is successful it could pave the way for addition temporary shops throughout the world. #wwdfashion (📷: Owen Kolasinski/BFA)
@carineroitfeld celebrated @crfashionbook’s first calendar last night with a dinner party at Spring Place in Manhattan. Photographed by @stevenkleinstudio, the calendar takes on a fitness theme and features @joansmalls, @gigihadid, @danielle_herrington_ – pictured here – and more. “[Carine Roitfeld] wanted me to feel sexy and she wanted me to be myself and feel it out on my own and do what I felt was right,” said Herrington, aka Miss October. #wwdeye
@saintrecords and @virgilabloh last night at @americanexpress’ “A Night With Success Makers” event. “I always bring it back to community because without that I wouldn’t have the courage,” said Knowles when asked how she has gotten where she is now. Read more highlights from their conversation on WWD.com. #wwdeye (📷: @lizdoupnik)
This Just In: Industry sources have told WWD that Anastasia Soare is rumored to be considering selling her beauty business, @anastasiabeverlyhills. According to those sources, Soare has tapped investment bank Imperial Capital to explore sale options for her eponymous beauty brand –– and with at least $340 million in net sales, this would be a big deal. Put in context of other recent transactions for makeup companies, Soare’s price tag could be in the billions if she were to sell the whole thing. #wwdnews #wwdbeauty (📷: @clint_spaulding)
@assouline’s latest book, “The Spirit of Bentley: Be Extraordinary” captures the adventurous attitudes and opulent lifestyles of @bentleymotors’ most creative owners and enthusiasts throughout the U.K. The 292-page hardcover has a section dedicated to showing its team of skilled artisans and photos of its most colorful owners, from George Bamford to designer @alicetemperley, pictured here by Aline Coquelle. #wwdeye
@google released its report on the most popular search terms this year. For fashion brands, the list was led by @gucci, the luxury brand that stunned the market last October when it pledged to stop using fur. Runner ups were @supremenewyork and @fashionnova, along with more established brands like @louisvuitton, @chanelofficial and @ysl. #wwdfashion (📷: @aitorrosasphoto)
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)