Stocks Slump on Profit Taking
Stocks started the trading session on a mixed note despite news that the Congress has put forward a deal that would pass a budget and avert a government shutdown this January. The House and Senate would avoid the fiscal cliff and potential generate good will with their constituents. Stocks over the past few trading sessions has seen lackluster volume, which has led to small gains and losses in a directionless market.
Buybacks have been a huge catalyst for increasing stock prices. With bloated balance sheets companies have been using their excess cash to purchase their own stock. Today, MasterCard (NYSE:MA) is set to split its stock 10:1; to boost capital returns. With shares trading comfortably above $750, MasterCard is carrying out a 10:1 stock split. The transaction processing giant is also hiking its quarterly dividend by 83% to $1.10 a share – or $0.11 post the split – and it has announced a $3.5 billion buyback that will kick in once the remaining $514 million of an existing $2 billion program is used up.
The budget deal was moderate in scope. Revenues to fund the higher spending would come from changes to federal employee and military pension programs, and higher fees for airline passengers, among other sources. A grand bargain plan which would be geared toward restructuring the tax code and federal entitlement programs was put on the back burner.
Stock losses accelerated into the close, with the Nasdaq the worst performing of the major indices. The Nasdaq composite tested support near 4,000. The next level of target support is seen near the 50-day moving average at 3920. Momentum is negative with the MACD (moving average convergence divergence index) generating a sell signal where the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread.
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