CullmanTimes.com - Cullman, Alabama

Business

November 9, 2012

Fearing ’cliff,’ investors finish brutal week

NEW YORK — Wall Street is peering over the “fiscal cliff” and feeling vertigo.

The stock market finished one of the worst weeks of the year Friday, pushing Washington to work out a deal to avoid the tax increases and government spending cuts set to take effect Jan. 1.

Remarks by re-elected President Barack Obama and House Speaker John Boehner on the looming deadline didn’t do much to cheer the market. Stocks finished barely higher for the day.

Chris Bertelsen, the chief investment officer at Global Financial Private Capital of Sarasota, Fla., said he expects Congress and Obama to reach a compromise to avoid the fiscal cliff.

“But it could well be the conventional U.S. political way of doing it — the last minute type of stuff — in which case the markets will be haunted by it until the point it happens,” he said.

For the week, the Dow Jones industrial average fell 277 points, or 2.1 percent. The Dow has fallen 795 points since hitting its closing high for the year, 13,610 on Oct. 5.

The S&P fell 2.3 percent during the week, its worst weekly decline since June 1, when investor concern about the debt crisis in Europe was rising.

Stocks began their slide Wednesday in the biggest sell-off of the year after voters returned Obama, a Democratic Senate and a Republican House to power. Investors immediately turned to worrying about the cliff.

If the tax increases and spending cuts take full effect, the U.S. will likely fall back into recession, the Congressional Budget Office said Thursday.

Boehner said Friday that he remains unwilling to raise tax rates on upper-income earners. But he left open the possibility of balancing spending cuts with revenue increases that come from some revisions to the tax code.

Stocks managed a small rally. The Dow was up about 30 points when Boehner started talking and about 80 points shortly after.

Then Obama said he would not accept any approach to federal deficit reduction that doesn’t ask the wealthy to pay more in taxes. A spokesman later said Obama would veto legislation extending tax cuts for families making $250,000 or more.

The Dow began sliding just before Obama spoke, at 1 p.m., and had lost its gain for the day by 1:30.

As they head into talks with Obama next week on the fiscal cliff, congressional leaders no doubt remember what can happen on Wall Street when investors are worried and watching Washington’s every move.

In September 2008, at the depths of the financial crisis, the House defeated a $700 billion emergency rescue of the nation’s financial system, sending the Dow plunging 777 points.

The Dow also slid for eight straight days in the summer of 2011 as politicians squabbled over a deal to raise the nation’s federal borrowing limit before eventually reaching an accord Aug. 1.

The index slipped as much as 634 points between July 27 as the political bickering intensified and Aug. 5, when S&P downgraded the national credit rating, citing the weakening of U.S. political institutions as a reason for the cut.

On Friday, stocks pared losses as investors took encouragement about the economy from a report by the University of Michigan showing that consumer confidence rose more than expected in November.

The Dow finished up 4.07 points at 12,815.39. The S&P advanced 2.34 points to 1,379.85, and the Nasdaq composite gained 9.29 points to 9,204.87.

Stocks are well below the highs of this year. The S&P is down 5.5 percent from its peak of 1,465 in September, when the Federal Reserve announced a third round of a bond-buying program intended to hold down borrowing costs.

The dimming outlook for Europe also weighed on markets this week. The European Commission, the executive arm of the European Union, cut its forecast for economic growth in the region Wednesday.

The yield on the 10-year Treasury note was little changed at 1.62 percent compared with 1.61 percent late Thursday. The yield on the benchmark government security has tumbled from as much as 1.84 percent Sept. 17, as investor aversion to risk has grown. Treasury yields fall as investor demand pushes up prices.

Among other stocks making big moves:

— Walt Disney fell $2.98, or 6 percent, to $47.06 after it said that advertising sales were flat at its ESPN unit, raising concern about the outlook for growth.

— Online deals company Groupon slumped $1.16, almost 30 percent, to $2.76 after it disclosed late Thursday that it was hurt by the economic problems in Europe and growth failed to meet expectations.

— J.C. Penney dropped $1.05 cents, or 4.8 percent, to $20.64 after the company reported a loss that was larger than investors were expecting. Shoppers have been abandoning the store after it got rid of blockbuster sales in favor of everyday low prices.

— Kayak Software surged $8.63, or 28 percent, to $39.67 after the company said it had agreed to be bought by rival travel website Priceline.com.

 

1
Text Only
Business
  • Long-term unemployed are still strong hires, study shows

    People who have been out of work for an extended period, once hired, tend to be just as productive on the job as those with more typical work histories, according to an analysis of almost 20,000 employees.

    April 4, 2014

  • CEMS groundbreaking CEMS holds groundbreaking

    March 31, 2014 1 Photo

  • Cook Social Worker of Year.jpg Cook chosen as Public Social Worker of the Year

    Angel Cook of the Cullman County Health Department was selected as Public Health Social Worker of the Year for 2014. She was recognized March 7 at the Public Health Social Work Seminar held in Montgomery.
     

    March 15, 2014 1 Photo

  • news_google.jpg First Apple, now Google hit with kids' app lawsuit

    Last month, 4- and 5-year-old brothers in New York quickly spent $65.95 in real money to buy virtual goods in Marvel's Run Jump Splash game on the family tablet. They were able to rack up the charges without entering a password. And for that, the boys' mother has joined a class-action lawsuit filed Tuesday against Google, accusing the company of deceiving consumers about its in-app purchase system, which critics say makes it too easy for kids to spend money on their Android devices.

    March 14, 2014 1 Photo

  • Alfa honors Ford.jpg Alfa Insurance honors local agent

    Alfa Insurance Agent Whit Ford of West Point received the Distinguished Service Award – Bronze Level for 2013 during the company’s annual awards ceremony in Birmingham.

    March 12, 2014 1 Photo

  • biz_target.jpg Target seeks new technology head after data breach

    Target Corp., still reeling from a security breach that exposed the personal information of tens of millions of customers, is seeking a new top technology executive to help prevent future attacks.

    March 7, 2014 1 Photo

  • 20140306-AMX-STAPLES6.jpg Staples to close 225 stores as online competition hurts sales

    Staples Inc., the largest U.S. office-supplies chain, will close as many as 12 percent of its North American stores and cut as much as $500 million in costs as online competition continues to hurt sales.

    March 6, 2014 1 Photo

  • Five things you should know about the Netflix-Comcast deal

    Now Comcast and Netflix have announced that they will directly interconnect their networks, rather than having Netflix traffic flow first through a third-party network. With this, another layer of Internet architecture - interconnection and peering - is under the microscope.

    February 28, 2014

  • thomspon to relocate.jpg Kristin (Brown) Thompson with Strong LLC relocating to NYC to open new office

    Strong Advertising Agency, announced that Kristin, a 2007 Cullman High School graduate, has opened a new office in Manhattan and working in the New York/New Jersey area serving as the marketing contact for advertising clients for merchandising and creative content development. She began working at Strong, LLC in Birmingham as an Account Executive Assistant in 2012 and was promoted to Account Executive after 6 months of employment.
     

    February 25, 2014 1 Photo

  • 01.jpg US News names its 'Best Cars for the Money'

    U.S. News & World Report Wednesday announced its annual Best Cars for the Money list on its Best Cars website.

    February 13, 2014 1 Photo