Apple's plunge skews mostly positive week on US markets

The showdown in Washington over the fiscal cliff gave US stocks another volatile week, but the apparent political stalemate -- just weeks before a potentially devastating fiscal crunch -- was not the defining market issue.

The key indices diverged sharply by Friday, with the explanation simple: Apple.

The iPhone and iPad maker, the world's largest company by market capitalization, lost 8.9 percent in the week, ending at $533.25, down $52.

It was Apple's weight that pulled the Nasdaq Composite down 1.07 percent to 2,978.04.

Meanwhile the Dow Jones Industrial Average closed the week at 13,155.13, up 0.99 percent.

And the broad-based S&P 500, which includes components from both, came in with an 0.13 percent gain to 1,418.07.

Apple's fall, including a stunning 6.4 percent loss on Wednesday, the worst one-day drop in four years, accelerated the decline from its peak above $700 in September.

Analysts have begun raising doubts the market darling can keep up the astounding growth performance it has delivered in past years, especially as agile competitors challenge its leading cellphones and tablets.

"It's becoming a show-me story. They're going to have to meaningfully beat estimates on the next report," said Michael James at Wedbush Securities.

Jody Giraldo at EquityStation said some investors are merely locking in gains before the end of the year.

"The stock had a very good run over the year, and it seems a lot of people continue to sell to lock in some returns," he said.

Stripped of Apple, stocks seemed somewhat immune to the fight over the fiscal cliff, the $500 billion in tax hikes and spending cuts slated to come in beginning January 1 that could send the economy back to recession.

The cliff issue did not go away: by the end of the week, there was little sign that President Barack Obama and Congressional Republicans had found common ground on legislation that would avert the cliff.

Still, financials rose 1.1 percent in the week; capital goods 0.4 percent; big industrial groups 1.3 percent; and energy companies 0.8 percent.

Dozens more companies were taking action because of the fight -- moving forward dividend payments and announcing hefty special payouts, to avoid higher dividend taxes likely to come after January 1.

They included Washington Post Co., Expedia, Sirius XM Radio, National Healthcare, T. Rowe Price and many others.

Analysts expect the cliff fight to have more of a negative impact on the market in the coming week if there is no sign of compromise between Republicans and Democrats on the key issues.

Otherwise, the focus will be on the Federal Reserve's last policy meeting of the year on Tuesday and Wednesday, with an announcement to be made on Wednesday.

With November's job creation data still unimpressive -- even if the unemployment rate fell to 7.7 percent -- the Fed is expected to hold firm on its ultra-low rates policy and expand its outright bond purchase program to make up for the expiration of its Operation Twist intervention.

"We expect the Fed to decide next week that it is not prepared to allow 'Operation Twist' to expire without being replaced," said Nigel Gault at IHS Global Insight.

The replacement purchases would likely be around $45 billion a month, taking total Fed action aimed at pressing down long-term interest rates to $85 billion a month, he said.

Key data releases over the coming week include the trade balance in October (Tuesday), import prices (Wednesday); retail sales and producer prices for November (Thursday); and consumer prices (Friday).

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