It was another confounding day in which good news was bad news on Wall Street. The Dow and the S&P ended well off session lows, but still lost ground for the fourth straight day despite several upbeat economic reports -- or perhaps because of them.
ADP's read on private sector hiring showed a much better-than-expected 215,000 jobs were added last month; sales of newly built homes jumped 25 percent in October; and the Fed's Beige Book pointed to more economic growth at a moderate to modest pace.
But those reports just fueled worries that the Federal Reserve might see the strengthening economy as a sign that it was time to ease back on its stimulus measures. The Dow Jones industrial average (^DJI) fell 25 points, the Standard & Poor's 500 index (^GPSC) dipped 2 points, and the Nasdaq composite index (^IXIC) added less than a point. The Dow had been down 125 points.
Retail stocks continue to struggle this holiday season.
J.C. Penney (JCP) lost 4.5 percent, despite a nice jump in November sales. However, the comparison is against a horrible period a year ago, when Penney was in disarray thanks to the overhaul undertaken by then-CEO Ron Johnson, and Hurricane Sandy had just ripped though the Northeast.
Sears (SHLD) tumbled 8 percent after a company controlled by CEO Eddie Lampert lowered its stake in Sears to 48 percent from 55 percent. Express (EXPR) tumbled 23 percent following a downbeat earnings outlook. And Aeropostale (ARO), another mall-based chain, fell 4 percent ahead of its earnings report. But apparel maker G-III (GIII) jumped 14 percent on strong earnings and an upbeat outlook.
Another hard hit sector was oil refiners. There's concern that more Iranian crude on the market will hurt U.S. exports. Marathon Petroleum (MPC) and HollyFrontier (HFC) both lost 4 percent. Valero (VLO) and Tesoro (TSO) fell about 3 percent each.
And the big loser of the day was Ambit Biosciences (AMBI). It lost a third of its value after the FDA said that a drug it's developing to treat leukemia would require more trials, which can be both expensive and time consuming.
On the upside, Newmont Mining (NEM) rose 2 percent as the price of gold bounced higher for a second straight day. But Newmont shares over the past year are still down 47 percent -- closely tracking the price of gold.
And Microsoft (MSFT) gained 1.5 percent, rising to its highest level in 13 years.
What to Watch Thursday:
At 8:30 a.m. Eastern time, the Labor Department reports weekly jobless claims, and the Commerce Department releases its second estimate on third quarter economic growth.
At 10 a.m., Freddie Mac reports weekly mortgage rates, and the Commerce Department releases factory orders for October.
These major companies are due to report quarterly corporate earnings:
After Market: Good News for Main Street Meant Worries for Wall Street
Usually, if borrowers have part of their debt written off or forgiven, they have to treat that amount as taxable income. But in the aftermath of the housing market's implosion, homeowners who defaulted on their mortgages and had their bank write off or forgive part or all of their loans weren't required to claim the forgiven amount as income. The Mortgage Forgiveness Debt Relief Act of 2007, which created this provision, has been extended before, but now, with home prices recovering somewhat, the incentive to preserve this provision is starting to fade. That makes it more likely that the mortgage-debt forgiveness provisions might not get renewed for 2014.
Federal tax law has allowed taxpayers to deduct state and local income taxes for years, but for the 57 million people who live in states that don't charge income tax, those provisions didn't provide any relief. That changed in 2004, when lawmakers allowed taxpayers to choose instead to take a similar deduction for sales taxes. The provision, which was originally slated to expire at the end of 2007, has been repeatedly extended by Congress. Over the years, it has provided $16.4 billion in deductions to affected taxpayers.
Teachers from kindergarten to high school are allowed to deduct up to $250 for money they spend buying supplies for their classrooms. This deduction's available even to those who don't itemize, making it more valuable than most deductions. According to figures from The Tax Institute at H&R Block, more than 3.6 million teachers took advantage of this provision in 2010 to deduct $915 million in expenses. This deduction has been extended regularly ever since its initially scheduled expiration in 2005, so, even though it's on the chopping block again, it's a pretty good bet that lawmakers will let the tax break survive into 2014.
These provisions allow certain taxpayers to deduct between $2,000 and $4,000 of qualified educational costs. This provision was also retroactively reinstated for 2012 at the beginning of this year. The difference, though, is that other tax breaks also exist for educational expenses, including the Lifetime Learning Credit and the American Opportunity Credit. (You have to pick either the tuition and fees deduction, or one of the two education credits. You're not allowed to double-dip.) Those tax credits makes it less crucial to extend the tuition deduction, although it's still a better deal for many people: The Tax Institute at H&R Block says that 2 million taxpayers used it to write off $4.36 billion in expenses in 2010.
Since 2006, taxpayers could claim a credit on certain expenses for remodeling their homes to make them more energy efficient. Currently, the maximum lifetime credit amount is $500, but amounts were higher in the past, and more than 43.5 million taxpayers have claimed an average of more than $765 using the credit.
Congress commonly waits until late in the year to extend expiring tax provisions like these, as well as others not mentioned above, such as the exemption for charitable IRA distributions, deductions for mortgage insurance premiums, and the higher immediate write-off amounts for small-business equipment purchases.
Lawmakers often use what's known as a tax-extenders bill to pass all the extensions in a single package. Earlier this month, WOTC Coalition President Paul Suplizio said that a seemingly unrelated Medicare-payments bill was probably the first step toward a year-end tax extenders bill that would cover expiring tax breaks like these.
And, just as millions of Americans procrastinate until April 15 to file their taxes, we can expect lawmakers to wait until Dec. 31 -- or beyond -- to decide the fate of these tax breaks.