Quantcast
Get breaking news alerts via email

Click here to manage your alerts
Stocks regain some of loss but still off big at close
First Published Dec 21 2012 07:50 am • Last Updated Dec 21 2012 06:29 pm

New York • Investors sent Washington a reminder Friday that Wall Street is a power player in talks to avoid the "fiscal cliff."

Stocks fell sharply after House Republicans called off a vote on tax rates and left federal budget talks in disarray 10 days before sweeping tax increases and government spending cuts take effect.

Join the Discussion
Post a Comment

The Dow Jones industrial average lost 120.88 points to close at 13,190.84, a decline of 0.9 percent. It had been down as much as 189. Other indexes posted comparable losses. The Standard & Poor’s 500 index fell 13.54 points to 1,430.15. The Nasdaq composite index declined 29.38 to 3,021.01.

The House bill would have raised taxes on Americans making at least $1 million per year and locked in decade-old tax cuts for Americans making less. Taxes will rise for almost all Americans on Jan. 1 unless Congress acts.

House Speaker John Boehner had presented what he called "Plan B" while he negotiated with the White House on avoiding the sweeping tax increases and spending cuts, a combination known as the "fiscal cliff."

But Boehner scrapped a vote on the bill Thursday night after it became clear that it did not have enough support in the Republican-led House to secure passage. He called on the White House and the Democratic-led Senate to work something out.

The market’s decline demonstrated that investors’ nerves are raw as they await a resolution.

"Where we are today, the market would be satisfied with the announcement of a stopgap measure," said Quincy Krosby, a market strategist at Prudential Financial. "The more the clock ticks, the more the market is saying, ‘Just give us something.’"

Sal Arnuk, a partner at Themis Trading, suggested that the sharp drop in stocks might have been an overreaction. The Dow was down as much as 189 points, and before the market opened, stock futures suggested a decline of 200 points or more.

"It’s not a surprise that they weren’t able to come to an agreement," he said. I don’t think most of Wall Street anticipated that they would come to an agreement."


story continues below
story continues below

Other markets registered their concern, but the reaction was not extreme. The yield on the benchmark 10-year U.S. Treasury note fell 0.04 percentage point to 1.76 percent.

The price of gold, which some investors buy when fear overtakes the market, climbed, but only by 0.9 percent. Gold rose $14.20 to $1,660.10 an ounce.

If the full "fiscal cliff" takes effect, economists say it could drag the United States into recession next year. The impact would be gradual, though, and a recession is not a sure thing.

Most people would receive only slightly less money in each paycheck. And the tax increases and spending cuts could be retroactively repealed if a deal comes together after Jan. 1.

If budget talks dragged on, many businesses might put off investment or hiring, and consumer spending could suffer. That’s why most economists say it would be crucial to reach a deal within roughly the first two months of 2013.

"Believe you me," Krosby said, "if you think that there is a recession in the offing you are going to see this market sell off. It’s sell off first, ask questions later."

It was not the first time that Wall Street worried about the "fiscal cliff" talks.

On the day after the election, when voters returned divided government to power, the Dow dropped 312 points. On Nov. 14, when President Barack Obama insisted on higher tax rates for the wealthy, the Dow dropped 185 points.

The sharp drop in stocks Friday was reminiscent of, although much smaller in scale than, what happened Sept. 29, 2008, during the financial crisis.

Next Page >


Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Login to the Electronic Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.