While you were sleeping: Hope fades for budget deal
Dec 28 (BusinessDesk) – Wall Street sank as Senate Majority Leader Harry Reid warned the US appeared set to head over
the so-called fiscal cliff as an agreement between Democrats and Republicans before the year-end deadline seems
unlikely.
“I don’t know time-wise how it can happen now,” Reid said in the Senate. He blamed Republicans for a lack of
cooperation.
Americans are worried too. Consumer confidence weakened more than anticipated in December, as the Conference Board’s
index of sentiment dropped to 65.1 from a revised 71.5 reading the prior month. To be sure, consumers’ assessment of
current conditions improved in December, according to the board.
“The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff,"
Lynn Franco, the board's Director of Economic Indicators, said in a statement. "While consumers are quite negative about
the short-term outlook, they are more upbeat than last month about current business and labour market conditions.”
In afternoon trading in New York, the Dow Jones Industrial Average shed 0.85 percent, the Standard & Poor's 500 Index dropped 1.15 percent and the Nasdaq Composite Index weakened 1.04 percent.
US Treasuries, however, benefitted as investors sought refuge from the fiscal uncertainty and the potential impact on
the economy and corporate profits.
“It’s clear heels are dug in in Washington, and we seem to be moving further away from a resolution and closer to the
possibility of going over the cliff,” Scott Graham, head of government bond trading at Bank of Montreal’s BMO Capital
Markets unit in Chicago, one of the 21 primary dealers that trade with the Federal Reserve, told Bloomberg News.
“The fear and worry is pushing stocks lower and Treasuries higher,” Graham said.
Still, the latest data on the labour and housing market bested expectations. Purchases of new houses climbed 4.4 percent
in November to a 377,000 annual pace, the highest level in more than two years, according to Commerce Department data.
Applications for jobless benefits dropped 12,000 to 350,000 in the week ended December 22, according to Labor Department
figures.
“If you could take the fiscal cliff off the table, if you could get the gorilla out of [the] corner of the room, the
platform for growth in 2013 is looking reasonably solid,” John Ryding, chief economist of RDQ Economics in New York,
told Bloomberg News. “But how do you get the gorilla out of the room? That’s the problem.”
In Europe, the Stoxx 600 Index eked out a gain of just under 0.1 percent from the previous close. National benchmark
stock indexes also moved higher in Frankfurt and Paris, while London was steady.
(BusinessDesk)