For those of you who thought that the S&P 500 (^GSPC 1.20%) could rally 1% in the face of a looming hike in taxes and steep spending cuts, think again! A mix of profit-taking after a strong two-day rally, coupled with a 3% drop in housing starts in November to an annualized average of 861,000 from October's level of 888,000, took the wind right out of the S&P 500's sails.
The housing starts figure was somewhat excusable considering that Superstorm Sandy more than likely interrupted building in the Northeast. The fiscal cliff debate, however, continues to take center stage, as it appears that we're ready for yet another showdown between Democrats and Republicans, who are planning to stand their ground after making secondary proposals.
On the day, the S&P 500 dipped 10.98 points (-0.76%) to finish at 1,435.81.
Leading today's move lower was for-profit educator Apollo Group (APOL), down 6.5%. Although no specific news moved the company, as my Foolish colleague Rick Munarriz recently opined, Apollo is a company that he doesn't expect to rebound anytime soon. Tougher lending requirements imposed by the U.S. government and poor loan repayments rates are among the reasons Apollo may find the sledding tough in 2013.
Intuitive Surgical (ISRG 2.21%), maker of the da Vinci robotic surgical system, also took it on the chin, down $31, or 5.7%, after short-selling research specialist Citron Research took aim at the company. Citron hit on five bullet points, including recent insider sells, the potential for lawsuits over botched surgeries, and a loss of management confidence as reasons Intuitive could head lower. Let's just say that I respectfully disagree with Citron's research and think the numbers going forward will speak for themselves, but the situation bears watching nonetheless.
For a second day in a row, Electronic Arts (EA 0.02%) put up a rotten egg for investors, falling 3.4%, but it was hardly all its fault this time. The real impetus for the gaming sector's crash was a Chapter 11 bankruptcy filing by THQ, which agreed to sell its remaining assets to Clearlake Capital. THQ was never a giant in the industry, but its departure is a wake-up call that prudent fiscal management and innovation are what drive game-makers higher.
Today's ray of sunshine on a gloomy day came from hard-drive disk manufacturer Western Digital (WDC 4.28%), which received an upgrade from an analyst at Craig-Hallum to "buy" from "hold" and had its price target boosted to $54 from $31. The covering analyst, Christian Schwab, specifically noted his belief that the December quarter will meet Wall Street expectations and thinks most of the negative supply concerns for the sector have subsided. Schwab also sees PC sales improving in 2013 and providing a boost to the hard drive sector -- an opinion I wholeheartedly agree with!
