Stocks, ETFs Sink On Fiscal Cliff Worries, Greece Woes

With just 34 days left to reach the fiscal cliff and only 11 days when both houses of Congress are in session, the debate over the fiscal cliff is rapidly reaching a boil. Major U.S. stock indexes and ETFs declined as the uncertainty claimed center stage in the day’s news flow.

Senator Harry Reid, the Democratic leader, said that not much progress had been made while President Obama stuck to his plan on raising taxes on the wealthy and met with corporate and small business leaders to champion his plans.

The uncertainty is making markets more nervous by the day as the potential for going over the cliff grows along with its danger of triggering another recession.

Of course, the only problem here is that the solution to the fiscal cliff is a fiscal cliff, spending cuts and tax hikes of some magnitude that will likely be an additional drag on the U.S. and global economy.

Economic reports were decent yesterday with a rise in home prices and durable goods down sharply from last month but beating expectations.

Consumer confidence rose from last month and also beat expectations.

Recession continues to be a threat and yesterday the Organization for Economic Cooperation and Development (OECD) warned that a new recession was possible due to problems in the United States and Europe.

In Europe, the finance ministers reached yet another agreement to save Greece, however, the Eurodollar fell as Europe still has deep problems to solve and the markets have seen numerous previous agreements like this one miss targets and fail.

Major U.S. ETFs:

Dow Jones Industrial Average (DIA) -0.69%

S&P 500 (SPY) -0.52%

Nasdaq 100 (QQQ) -0.39%

Russell 2000 (IWM) -0.16%

Gold (GLD) -0.42%

Oil (USO) -0.65%

We continue to carefully monitor Apple Computer (AAPL) as it struggles to reclaim its 200 day moving average and remains approximately 17% below its September high. The last time Apple (Nasdaq:AAPL) had a sustained break below its 200 day moving average was in the depths of the financial crisis and was followed by a 50% decline in the stock and in the S&P 500 (NYSEARCA:SPY) over the next few months.

Bottom line: Global financial markets remain in tenuous territory as the fiscal cliff drama unfolds and recession lurks as a growing possibility.

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