Stocks are headed higher today as investors and traders are gaining confidence in Washington's ability to resolve the so-called fiscal cliff, a series of tax hikes and spending cuts that are scheduled to take effect at the beginning of next year. As we approach the lunch hour, the Dow Jones Industrial Average (^DJI 0.51%) is higher by 62 points, or 0.56%.
In an otherwise quiet day, the New York Federal Reserve Bank released the results of its Empire State manufacturing index for the month of December -- the index is a regional economic indicator that tracks the sentiment of manufacturing executives throughout the eponymous region. According to the bank, "The general business conditions index was negative for a fifth consecutive month, falling three points to -8.1. The new orders index dropped to -3.7, while the shipments index declined six points to 8.8." A negative reading indicates contraction.
Empire State Manufacturing General Business Conditions Index data by YCharts.
Shares of Apple (AAPL 0.11%) are trading lower despite upbeat reports regarding sales of the iPhone 5 in China. The newest version of the popular smartphone launched there at the end of last week. In a press release this morning, Apple announced that it sold over 2 million units of the new device over the weekend. "Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China," said Tim Cook, Apple's CEO. "China is a very important market for us and customers there cannot wait to get their hands on Apple products."
It's been a tough few months for the world's largest publicly traded company by market capitalization. Since topping out above $700 in mid-September, shares of Apple have lost roughly a quarter of their value, leading multiple analysts to cut their price targets and outlooks for the stock. At the end of last week, for example, an analyst at Jefferies claimed that Apple has started cutting orders to iPhone 5 suppliers due to excess inventory. And yesterday an analyst at Citi Research downgraded the company's stock to neutral from buy and lowered its price target to $575 from $675.
To see why our resident Apple expert thinks an upcoming Apple TV could be a game changer for the company, read one of his latest articles: "How Many TVs Could Apple Sell?"
With respect to the Dow, shares of financial companies are pushing the blue chip index higher today. Bank of America (BAC 1.42%) is leading the way, up by 2.55%, followed not far behind by Travelers (TRV -0.02%) and JPMorgan Chase (JPM 1.07%). It's safe to say that much of the gain here is due to optimism that policymakers in Washington will be able to resolve the fiscal cliff before the economy careens over it.
Last week, President Obama and House Speaker Boehner spoke on multiple occasions in an effort to reach a compromise. They nevertheless appeared to get no closer to a deal. On Wednesday, Speaker Boehner told the media:
The president wants to pretend spending isn't the problem. That's why we don't have an agreement. Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to -- and over -- the fiscal cliff.
This week, however, there appears to be significant reason for optimism. Yesterday, Speaker Boehner came to the table with a tax-rate increase for the first time in the debate. Increasing revenue via tax hikes for the wealthiest Americans has been a line in the sand for Democrats. According to multiple sources, Boehner offered to up the rate on those earning more than $1 million a year if Democrats agree to make significant cuts in entitlement programs. While the White House purportedly viewed the move as progress, President Obama is nevertheless holding out for a deal that includes rate increases for those earning more than $250,000 a year.
