Passage of bill to avoid "cliff" should bolster Wall Street

Speaker of the House John Boehner (R-OH) (front, in green tie) walks with Congressman Dave Camp (R-MI) (R) after a meeting with House Republicans about a ''fiscal cliff'' deal on Capitol Hill in Washington January 1, 2013.

Credit: Reuters/Joshua Roberts

By Ryan Vlastelica

NEW YORK | Wed Jan 2, 2013 12:16am EST

NEW YORK (Reuters) - U.S. stocks are poised for gains to begin the year after the late passage of a bill to avoid harsh tax hikes that would have hit most Americans and crimped economic growth.

However, harsh reality awaits any euphoria that comes from avoiding the "fiscal cliff". In two months, battles over further spending cuts and, in particular, the U.S. federal debt limit will come to a head.

The House of Representatives voted for a bill passed on Monday by the Senate that will raise taxes on wealthy individuals and families and preserve certain other benefits that will, together, soften some of the blow that would have been sustained without an agreement to avoid the fiscal cliff.

That puts Wall Street in prime position to begin 2013 with a rally, even if thorny issues remain to be addressed in the coming months in Washington.

Asian markets extended gains modestly, with the MSCI Asia Pacific ex-Japan index of stocks up 1.7 percent. U.S. markets will not have a chance to react until 6 a.m. ET, when futures trading begins after the New Year's Day holiday.

"When you separate the fundamentals of the economy from the headlines, the fundamentals really suggest we can support higher prices in the new year," said Bill Vaughn, equity portfolio manager at Evercore Wealth Management in San Francisco.

The Standard & Poor's 500 stock index ended the year up 13 percent, its best gain since 2009, mostly shrugging off the debt-related worries that dominated headlines during the year.

Equity markets held up in the last two months of the year as well, expecting a resolution to head off $600 billion in spending cuts and tax hikes that could push the economy into recession if they stay in effect for long. While the deadline to avert the cliff was December 31, legislation can be formulated to retroactively prevent going over.

The back-and-forth in recent weeks has primarily been of concern to businesses, where confidence has eroded. Some slowing in economic growth due to the impasse is expected, but that may play into the hands of value investors if the market corrects in coming months.

"It appears as though politics will dominate for some time," said Richard Bernstein, chief executive of Richard Bernstein Advisors in New York. "That being said, equity market valuations already reflect this ... the stock market is attractive from my perspective."

Stock markets around the world were closed Tuesday because of New Year's Day. Some Republicans in the House had expressed concern on Tuesday afternoon that a bill would not be finished before U.S. markets open.

Many traders will still be away from their desks because of the holiday, indicating trading volume will stay near its recent low levels. The anemic action, coupled with uncertainty over the cliff, resulted in a spike of volatility in December, with the CBOE Volatility index jumping 13.5 percent in the month.

DEBT CEILING BATTLE REMAINS

The bill that passed does not contain the kind of spending cuts that many conservative Republicans favor in order to bring down the high U.S. federal debt.

Even as this battle recedes, markets will look ahead to another fight in the next few months, this time over whether Congress will approve an increase in the U.S. debt ceiling.

The White House has said it will not negotiate the debt ceiling as in 2011, when the fight over what was once a procedural matter preceded the first-ever downgrade of the U.S. credit rating. But it may be forced into such a battle again. A repeat of that war is most worrisome for markets.

"The spending side fight looms and it will be tougher," said David Kotok, chairman and chief investment officer at Cumberland Advisors in Sarasota, Florida. "The Republican caucus is tighter on that side."

Markets posted several days of sharp losses in the period surrounding the fight in 2011. Even after a bill to increase the ceiling passed, stocks plunged in what was seen as a vote of "no confidence" in Washington's ability to function, considering how close lawmakers came to a default.

Economists at Goldman Sachs, in a note Tuesday, said the coming fight to raise the debt ceiling -- where Republicans are likely to demand spending cuts while President Obama pushes for more taxes -- "is likely to be at least as politically difficult as the last increase was in the summer of 2011."

During this fight, the markets have been less volatile, largely because the effects of the spending cuts and tax hikes will be gradual, and there was an ongoing expectation that a retroactive fix was in the offing.

(Additional reporting by David Gaffen, David Randall, Chuck Mikolajczak and Richard Leong; Editing by Neil Fullick and Paul Tait)

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Wall Street ends 2012 riding high on "cliff" deal optimism

Traders work the floor at the New York Stock Exchange in New York, December 26, 2012.

Credit: Reuters/Eduardo Munoz

By Chuck Mikolajczak

NEW YORK | Tue Jan 1, 2013 9:27am EST

NEW YORK (Reuters) - U.S. stocks closed out 2012 with their strongest day in more than a month, putting the S&P 500 up 13.4 percent for the year, as lawmakers in Washington closed in on a resolution to the "fiscal cliff" negotiations.

The S&P 500's gain for the year marks its best performance since 2009, as stocks navigated through debt crises in Europe and the United States that dominated the headlines. Still, with numerous issues involving budget talks unresolved, markets could still be open to a shock should the deal break down unexpectedly.

Fittingly, in the last session of the year, stocks bounced back and forth on the headlines out of Washington, as both President Barack Obama and Republican Senate leader Mitch McConnell issued statements indicating a deal to avert the cliff was close.

"The worst news could have been the president coming out and saying, 'We don't have a deal and we've giving up,' and he didn't say that," said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, based in Scottsdale, Arizona.

"My personal skepticism, I don't trust anything out of Washington until it is signed, sealed and delivered, and it is not signed, sealed and delivered."

While a deal on the cliff is not yet official, investors may be ready to take on more risk next year in hopes of a greater reward.

McConnell said an agreement had been reached with Democrats on all of the tax issues in the potential deal, removing a large hurdle in the talks. An agreement is needed in order to avert a combination of tax hikes and spending cuts that many believe could push the U.S. economy into recession.

A source familiar with the matter said an emerging deal, if adopted by Congress and President Barack Obama, would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households earning above $450,000 annually.

Despite the uncertainty, the market encountered only occasional bouts of volatility this year. For the first time since 2006, the CBOE Volatility Index or VIX .VIX, the market's favored indicator of anxiety, did not surpass the 30 level, a threshold that usually signals heightened worry among investors.

"Given all the threats in 2012, the VIX was relatively tranquil," said Bill Luby, the author of the VIX and More blog in San Francisco, citing the crises in Spain and Greece, along with constant intervention from the Federal Reserve.

The Dow Jones industrial average .DJI gained 166.03 points, or 1.28 percent, to end at 13,104.14. The Standard & Poor's 500 Index .SPX gained 23.76 points, or 1.69 percent, to finish at 1,426.19. The Nasdaq Composite Index .IXIC gained 59.20 points, or 2.00 percent, to close at 3,019.51.

Monday's gains enabled the S&P 500 to snap a five-day losing streak, its longest skid since September.

The S&P 500 closed out 2012 with a 13.4 percent gain for the year, compared with a flat performance in 2011. The Dow rose 7.3 percent in 2012 and the Nasdaq climbed 15.9 percent.

Financials .GSPF were the strongest of the S&P's 10 industry sectors this year, gaining more than 26 percent, led by Bank of America (BAC.N), which more than doubled in 2012, and was the best performer of the Dow industrials.

Of the S&P's 10 sectors, only defensively oriented utilities .GSPU ended the year lower, falling 2.9 percent.

Gains in Apple Inc (AAPL.O), the most valuable U.S. company, helped lift the Nasdaq. The stock rose 4.4 percent to $532.17, lifting the S&P information technology sector index .GSPT up 2.2 percent. For the year, Apple rose 31.4 percent, ending with a market value of about $501.4 billion.

Each of the Dow's 30 components finished the session in positive territory, led by a 3.2 percent climb in Caterpillar Inc (CAT.N) to $89.58.

Volume was modest, with about 6.06 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly below the daily average of 6.42 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 6 to 1, while on the Nasdaq, four stocks rose for every one that fell.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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PRESS DIGEST - Wall Street Journal - Dec 15

n">Dec 15 (Reuters) - The following were the top stories in The Wall Street Journal on Thursday. Reuters has not verified these stories and does not vouch for their accuracy.

* Japanese authorities are set to announce Friday that they have brought the Fukushima Daiichi complex's reactors to a state called cold shutdown, a milestone in stabilizing the site.

* The SEC is heading on a collision course with the federal judge who rejected the proposed $285 million settlement between the agency and Citigroup Inc.

* Research In Motion's falling share price is ratcheting up pressure on directors to overhaul the company's management structure, which has allowed the firm's two chiefs to also serve as co-chairmen.

* Wall Street research analysts, who usually write rosy reports on companies their firms take public, gave surprisingly faint praise to the latest big Internet stock to hit the market, discount deal site Groupon Inc.

* With foreign investors calling for a management overhaul, scandal-hit Olympus Corp said Thursday it will aim to hold an extraordinary shareholder meeting in March or April.

* Hasbro Inc, the manufacturer of such classics as Monopoly, Scrabble and Operation, remains dogged by a disastrous Christmas last year, when sales fell and profits plunged by 15 percent for the quarter.

* Nokia Corp is getting back into the U.S. smartphone business with an entry-level model powered by Microsoft Corp.'s latest Windows software and sold by T-Mobile USA.

* Three years after Siemens AG reached a record foreign-bribery settlement with U.S. authorities, the German industrial conglomerate is capitalizing on business from an unexpected place-the U.S. government.

* Hewlett-Packard Co, still smarting from criticism over the exit packages it awarded to ousted chief executives Mark Hurd and Leo Apotheker, will limit severance payments it makes to senior executives who are pushed out.

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A brief, ignoble history of the BlackBerry on Wall Street

While Occupy Wall Street tries to beat down the doors of the financial industry - with protests and squid effigies -Wall Street may actually be thoroughly destroying itself from within, thanks to the addictive powers of the BlackBerry. For over four years, the Venn diagram of "BlackBerry addiction" and "Wall Street failure" has overlapped to include former Lehman Brothers CEO Dick Fuld and now former MF Global CEO Jon Corzine. The New York Times reported this week, for instance, that Corzine's risk-taking meant that he "compulsively traded for the firm on his BlackBerry during meetings, sometimes dashing out to check on the markets."

The BlackBerry again! That little device is like the Zelig of Wall Street, blending into the background and yet always becoming the center of attention, slowly sidling its way into history, an enabler of the all the worst and least thoughtful impulses that run through the heads of investment bankers and traders.  It's time, however, that the BlackBerry's many misadventures in finance were put on its permanent record, and Easy Street is here to help.

Herewith, a brief timeline of the BlackBerry's seductive and destructive effect on Wall Streeters.*

2000: "As early as 2000, the word 'CrackBerry' was being used to describe the addictive nature of these devices," Canadian researcher Catherine Middleton (not the princess) points out in a research article published in 2008. She adds, "there is no doubt that BlackBerries are deeply embedded in the daily lives of many of their users, and can trigger conflicts about work boundaries."

February 2007: Wall Street CEOs, including Dick Fuld at Lehman Brothers and Richard Handler at Jefferies, confess to the Wall Street Journal to being addicted not just to their BlackBerrys, but also to a particular game installed on them: BrickBreaker. Fuld even had the game uninstalled, but then could not live without it. Note that this article runs well before the subprime crisis hit Wall Street in June 2007.

March 2007: Dealmakers of all kinds seem curiously unable to put down their BlackBerries, even in cities as exciting as New Orleans.

March 2007: David Jacobs, a vice-chairman of Deutsche Bank, describes his new separation from his company-issued BlackBerry as "liberating and terrifying." He elaborates, "“It’s liberating in that you actually get to talk to your kids. But it’s tough going from 125 emails a day to none. It’s cold turkey.” [Postscript: Jacobs is now chairman of renewable-energy company rTerra, which presumably would have him back on the BlackBerry sauce.]

June 2007: A travel site that creates quirky vacation itineraries offers "Blackberry-free zone packages."

October 2007: As the subprime crisis spreads and bank profits get hit, Bank of America clamps down on issuance of BlackBerries to employees.

September 2008: Neel Kashkari, the man in charge of TARP, uses his BlackBerry to calculate the infamous sum of the bailout: $700 billion. The Washington Post wrote over a year later, “In Washington, [Kashkari] used his BlackBerry to determine the bailout sum presented to Congress. His arithmetic: “We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number.”

September 2008: As the CEOs of America's major banks waited for Treasury Secretary Hank Paulson to tell them about TARP, they were "milling around and tapping on their BlackBerries," according to Andrew Ross Sorkin's Too Big to Fail. 

October 2008: The MC at the Most Powerful Women in Banking gala instructs attendees to put away their omnipresent BlackBerries, deadpanning, "you haven't been able to solve the crisis in the past 10 months, so you won't be able to solve it in the next few hours."

October 2008: Andrew Lahde, the founder of Lahde Capital, closes his fund. In his goodbye letter to investors, he encourages his fellow financiers to re-center themselves. "I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the BlackBerry away and enjoy life."

December 2008: Congressional hearings on the financial crisis and the problems of automakers are marred for viewers by aides constantly checking their BlackBerries instead of keeping an eye on the action.

April 2009: Wells Fargo bans employees from checking their BlackBerries during meetings, and even fines them $100 if they violate the rule. 

June 2009: As BlackBerry addiction becomes a bigger issue in all industries, Hollywood talent agencies including CAA ban BlackBerry use during meetings.

September 2010: JP Morgan starts testing the iPhone as an alternative to standard-issue BlackBerries for its staff.

November 2010: Greg Farrell, author of Crash of the Titans, reveals that former Goldman Sachs executive Peter Kraus lost out on a job at Bank of America Merrill Lynch partly because then-CEO Ken Lewis disliked how Kraus ostentatiously took the floor at meetings and "continually flashed around his bright green BlackBerry."

November 2010: Bank regulators in the U.K. adopted a rule to tape BlackBerry conversations and those on other mobile phones as a way to catch fraud and insider-trading.

December 2010: The U.S. Treasury's new blog and Flickr feed include a picture of Secretary Geithner's trip to Asia, captioned: "The perfect meal: Udon and a BlackBerry." Sharp-eyed tweeters notice the BlackBerry's screen holds an email about the debt ceiling.

December 2010: David Einhorn, one of Wall Street's more regularly successful investors and the one who correctly suspected that Lehman  was playing fast and loose with accounting, tells DealBreaker's Bess Levin that he has never owned a BlackBerry.

February 2011: Alleged insider traders including Samir Barai are done in by their BlackBerry messenger chats, unaware that they cannot be fully deleted.

June 2011: A lawyer suggests to the Wall Street Journal that BlackBerry usage and being constantly connected to the office is ample excuse for taking a private jet.

June 2011:  Morgan Stanley's "outlook has changed so much from the heady days of the past that the firm is planning to keep a close watch on BlackBerry usage....One Morgan Stanley employee joked Tuesday that he planned to return a phone call from a land line because he didn't want to use a BlackBerry."

June 2011: An executive at General Growth Properties has it written into his contract that he gets to keep his company-issued BlackBerry if he leaves.

August 2011: Many Wall Street firms tell their employees to stay home after Hurricane Irene, reasoning that they have BlackBerries to keep in touch with the office.

October 2011: In the Wall Street movie Margin Call, a key plot point involves a BlackBerry: when the firm lays off a top executive, played by Stanley Tucci, it also turns off his company-issued BlackBerry. Much of the ensuing action centers on how the firm then can't find the executive, who may hold key information about its exposure to bad debt.

October 2011: The founder of RIM high-tails it to YouTube to apologize for a worldwide BlackBerry outage; the effect on Wall Street is bafflement and paranoia. 

Of course, you can't really blame the diabolically addictive little smartphone for Wall Street's trouble.  Wall Streeters just manifest with their BlackBerries the compulsive behavior that the Street encourages elsewhere - the excesses of ambition and speed and late nights and status-seeking under the guise of competition and success. Traders - like Fuld and Corzine - are used to responding to every breath of the market, which makes them particularly susceptible to the impulse of constant feedback and stimulation; an uncharitable comparison would be to the legions of Vegas gamblers who love to play the slots.

Caitlin Zaloom captures the dichotomy well - of the cool banker or trader who becomes a hothead when given a chance to trade. Zaloom is an ethnographer who has turned her talents to Wall Street in her book, "Out of the Pits: Traders and Technology from Chicago to London." In her chapter on Economic Men, she writes,

Crowds like those on the trading-room floor have often been thought to undo reason and unleash passions, and traders' conduct certainly support that claim. Yet dealings with money have been thought to have the opposite effect. The pursuit of wealth, many original philosophers of capitalism thought, would dampen socially destructive passions. These thinkers trusted that the pursuit of wealth would counteract the more violent impulses of competition and channel them toward self-control...[yet] in contrast with the dispassionate affect that money ideally encourages, humor and hot-blooded behavior mark the trading floor and dealing room. Traders engage ardently with money; they do not perform their economic calculations with detached reason.

In other words,  the BlackBerry is often just an outlet for the excitement junkies and perpetual crisis mindset that Wall Street breeds. And is it a coincidence that Goldman Sachs - the firm that so many people have tried to take down that it's the Rasputin of Wall Street - has survived so long and in such hale health? Not if you consider that its CEO, Lloyd Blankfein, formerly known as one of the Street's biggest BlackBerry addict, has openly abandoned his BlackBerry.

*I  have to give a big hat tip to the talents of Bess Levin, the doyenne of DealBreaker, for her immaculate attention over the years to chronicling BlackBerry abuse. Her archives were a rich source for this timeline.

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Anti-Wall Street activists march on West Coast ports

A group of Occupy Oakland demonstrators remain outside the Port of Oakland as the Occupy movement continues to shut down West Coast ports in Oakland, California December 12, 2011.

Credit: Reuters/Stephen Lam

By Laird Harrison and Emmett Berg

OAKLAND, Calif | Tue Dec 13, 2011 6:55am EST

OAKLAND, Calif (Reuters) - Anti-Wall Street activists trying to shut down West Coast ports on Monday managed to close several terminals and scuffled with police, but fell short of mounting the full-scale cargo blockade they had promised.

Thousands of protesters marched on ports from California to Alaska in rallies seen as a test of the Occupy movement's momentum, hoping to draw attention to economic inequality and a financial system they say is unfairly skewed toward the wealthy.

Demonstrators succeeded in disrupting arrivals of trucks and dockworkers at some waterfronts along the coast, effectively closing two terminals in Oregon and third in Washington state and disrupting port operations in Oakland.

"Whose ports? Our ports!" a crowd of around 1,000 activists chanted in Oakland, long an Occupy hot spot, as they paraded before dawn from a transit station to the city's cargo port and split into groups to try to block terminal entrances.

The long-planned action comes after the Occupy movement that began in New York in September has seen its tent camps in most big West Coast cities dismantled in police raids, leaving the movement looking to regain its footing.

But by dark, demonstrators had largely failed to cause the large-scale halt to West Coast commerce some had sought, and several dozen protesters had been arrested along the coast.

The largest rallies unfolded in Oakland, where protesters had hoped to stage a repeat of a previous protest that briefly succeeded in shuttering its port, the nation's fifth busiest container port by volume.

Oakland Mayor Jean Quan said the port protest, far from helping the working class, was actually harming her city and workers. By Monday evening, police said about 500 protesters were still standing on a road used by trucks at the port.

"People have to think about the consequences of the shutdown," Quan told reporters. "I think the ruling class is laughing right now."

Throughout the day, operations at several of the Port of Oakland's seven terminals were disrupted and delayed, and a few terminals closed early, the facility said in a statement.

INJURED VET LEADS OAKLAND MARCH

Former Marine Scott Olsen, whose injury during clashes between Oakland police and demonstrators in October gave fresh impetus to protests, later led an afternoon march in Oakland.

Occupy Oakland spokesman Mike King called the blockade a success, saying cargo traffic at the port was limited to just two vessels in anticipation of the demonstration, and that longshoremen and Teamsters were largely absent from work.

"Nobody crossed the picket line, and most truckers stayed away," King said, adding that the only cargo loaded onto trucks in the terminal yards was material already taken off ships.

The port's executive director, Omar Benjamin, acknowledged "sporadic disruptions" but insisted the facility had remained operational throughout the day. Police reported two arrests.

Workers affected by the protests were divided.

"It's not good for the economy," said Agustin Luna, 39, an independent trucker waiting in his big rig to deliver a load of alfalfa to a ship in Oakland bound for Japan.

But Sean Martin, another independent trucker waiting outside an Oakland terminal, said: "I support what they are trying to do. Wages have steadily dropped."

At the Port of Long Beach, adjacent to Los Angeles, some 250 to 300 people rallied in the rain at a terminal facility where they scuffled with helmeted police officers who shoved them back with batons in an effort to keep the entryway clear.

Two were arrested before demonstrators left the area to block traffic along a thoroughfare through the port. But protesters later began to disperse on their own as rains grew heavier and police converged in force.

In San Diego, four people were arrested at that city's port as demonstrators tried to block a road into the facility.

ARRESTS IN WASHINGTON STATE

Police in Seattle said they made 11 arrests at a port protest after demonstrators threw burning flares, bags of bricks and metal bars. One officer was struck in the face with a bag of paint, police said.

In nearby Bellingham, authorities arrested about 16 people who had sprawled across the Burlington Northern Santa Fe railroad tracks in an attempt to stop trains from reaching the port, railway spokesman Gus Melonas said.

Meanwhile in Oregon, several hundred protesters at Portland's harbor blocked gates to two of the port's four main terminals, including the chief deep-draft container dock, forcing the closure of both facilities.

"We are not able to get trucks through or employees in," port spokesman Josh Thomas said. "Nobody is going to work, not the longshoremen, office workers or truckers."

Portland police said they had detained three men in a car on their way to the port several hours before the march during a traffic stop in which officers seized a loaded .40-caliber handgun, a sword, radios and gas masks.

The men told police they had planned to attend the demonstration and had arrived early to "scout the area." The driver was arrested on a charge of possessing a loaded firearm in public while a passenger was held on an outstanding warrant. The third man was released.

In a show of solidarity with the West Coast protests, some protesters refused to leave a private atrium in the World Financial Center in New York City, and 17 were arrested. (Additional reporting by R.T. Watson in Long Beach, Dan Cook and Teresa Carson in Portland, Laura L. Myers and Nicole Neroulias in Seattle, Mary Slosson in Los Angeles and Amman Ali in New York; writing by Steve Gorman, Dan Whitcomb and Alex Dobuzinskis; editing by Cynthia Johnston and Jason Neely)

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