Market Drivers: Apple, Dividends, Fiscal Cliff

It has been eerily quiet around here this week. Yes, the fiscal cliff debate still rages, but the markets already seem tired of it. The VIX, while off the lows, remains muted which is odd for a market facing such a dramatic economic event. I suppose November payroll data could wake the Street up on Friday, but really, we aren't likely to be surprised. Maybe everyone has taken the week off to do holiday shopping?

With low volumes and steady emotions in mind, here are the 3 things driving the market this week: Apple, Dividends, Fiscal Cliff

  • Apple Takes a Nose-dive:

In a quirk of the markets Wednesday, the Dow closed up 82 points (0.64%), while the S&P 500 was up only 2 points (0.16%) and the Nasdaq Composite actually closed down 23 points (-0.77%). The culprit? AAPL. As a member of the Nasdaq and S&P 500 indexes, but not the Dow, Apple’s drop of 6.4% on the day created a seldom seen anomaly in the broad market indexes. Equally surprising, the drop was the biggest single-day loss in AAPL in over four years. Reasons cited for the pull-back:

·         Increased margin requirements for some traders

·         Investors locking in capital gains ahead of year-end tax changes

·         Disappointing comments from Deutsche Bank suggesting there will be no special dividend forthcoming

·         AT&T’s announcement that Q4 smartphone activations trail last year’s numbers

·         The Death Cross

  • Fiscal Cliff Debate Wears On:

More of the same this week. Per the media, there’s an impasse over taxes. Treasury Secretary Geithner got involved in the negotiations threatening the administration’s willingness to let the economy go over the fiscal cliff.  Obama has spent the week courting big businesses and the Republicans have done what they can to fight back.  The only unusual bit is that the markets have remained fairly calm through it all.

  • Dividend Declarations at a Frenzy:

We have already seen over three times as many special, accelerated and otherwise unusual dividend declarations in 2012 vs 2011. Even more dramatic, in the last three weeks the number of special dividend declarations jumped from just 35 to 160. I expect we will see quite a few more in the next couple of days, although most declarations will have to be made before the middle of next week in order to accommodate a 2012 payment date.

And one for the random category:

I had drinks with Wall Street legend, Art Cashin, this week and the conversation turned to Christmas and traditions. He almost broke my heart by telling me the following story about how Santa Claus got his red suit with the white trim. Turns out, the jolly old fellow didn’t always dress like that, but in 1931 something happened to change our perception of him forever: “Hoping to cheer up a nation slipping into a Depression, Coca-Cola hired an advertising artist to paint them a cheerful Santa for a fun and festive holiday promotion. The artist thought that Santa's outfit should not clash with the Coke sign, so he used the same colors – red and white. Thus, Santa had a bright red coat, trimmed in snow white fur that matched his snow white beard. At last the current image was complete as Coca-Cola flashed the ads around the globe.”

Props to Coca-Cola for establishing some seriously lasting product placement. Perhaps Pepsi can update the Easter Bunny?