US mid-afternoon: Fiscal cliff concerns dent stocks

US stocks were trading firmly in the red on Wednesday afternoon as disappointing economic data and concerns about the impending ‘fiscal cliff’ outweighed some decent results from Cisco Systems.

Retail sales fell by 0.3% in October (+3.8% year-on-year) to $411.6bn. The market consensus was expecting a 0.2% decline. Retail sales for September were revised higher to 1.3% (5.4% year-on-year) from the previously reported 1.1%.

Market chatter still abounds on the danger of the ‘fiscal cliff’ as the country’s politicians prepare for talks scheduled for Friday to come to an agreement on how to deal with the budget deficit.

President Barack Obama’s administration and Republican lawmakers must come to an agreement in order to avoid $607bn in spending cuts and tax increases that, if not changed, will take effect on January 1st.

Investors were also fretting about US dividend taxes: these have been at 15% for nearly a decade but could automatically increase when the 2003 deal expires in 2013.

The mood was upbeat to start the session with dovish comments from Federal Reserve Vice Chair Janet Yellen providing a lift. Yellen, who is widely expected to be Chairman Ben Bernanke’s successor if he leaves, said that the Fed should change its stance and tie the interest rate outlook to unemployment and inflation.

“The Committee might eliminate the calendar date entirely and replace it with guidance on the economic conditions that would need to prevail before lift-off of the federal funds rate might be judged appropriate,” she said.

Company movers

Networking equipment firm Cisco has given a boost to the whole sector with better-than-expected fiscal first-quarter figures. Juniper Networks and F5 Networks were both being pulled along on Cisco’s coat-tails.

Trendy retail group Abercrombie & Fitch soared after raising profit guidance for the year on back of better than expected third quarter figures.

Banking groups Bank of America and JPMorgan Chase & Co were heavy fallers.

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