After Senate Majority Leader Harry Reid’s Tuesday remarks concerning lack of progress in fiscal cliff talks caused the market to slump, it rebounded Wednesday when House Speaker John Boehner told reporters he was optimistic a deal would be reached before the Dec. 31 deadline. The Dow Jones industrial average closed up nearly 107 points at 12,985.11 after being down as much as 112 points in early Wednesday trading. Likewise, the Standard and Poor’s 500 was up 10.99 points and the Nasdaq composite rose 23.99 points.
The nation has been on pins and needles since the Nov. 6 election, concerned the US will go over the “fiscal cliff” and send the economy back into recession. If Congress cannot reach a budget resolution huge tax increases and spending cuts will go into effect Jan. 1.
“I don’t think anybody in Washington is going to do something so draconian or so negative, that we’re going to trigger a recession,” Piper Jaffray market strategist Craig Johnson told the Associated Press.
The market has felt the pressure as uncertainty about possible increases to capital gains taxes has prompted investors to sell their stocks. In fact, many companies have paid special year-end dividends or moved up their quarterly payments so investors can avoid paying higher taxes on the dividends that will take effect in 2013 without a Washington compromise on taxes and spending. The payouts have impacted shares.
Costco, for example, saw its stock increase by $6.07 to $102.58 after the company announced a special dividend of $7 a share to be paid in December, in addition to the regular quarterly dividend. Likewise, shares of casino operator Las Vegas Sands Corp. rose 5.3 percent after the company announced plans to distribute more than $2 billion to shareholders before year’s end.
“That’s what Wall Street is focused on,” Schaeffer’s Investment Research analyst Ryan Detrick told the Associated Press. “Everybody is watching to fiscal cliff.”
President Barack Obama, however, says he believe the parties will come together to create a “framework” for debt reduction before Christmas. He is seeking $1 trillion in new revenue, and dismisses Republican opinion that limiting tax deductions and loopholes will be sufficient. Still, according to parties who have attended the White House meetings, Obama is confident a marginal rate increase will pass, even if the income cut-off rises from his proposed $250,000 to $500,000.
“I’m asking Congress to listen to the people who sent us here to serve,” Obama said in a Wednesday press conference. “I’m asking Americans all across the country to make your voice heard. It’s too important for Washington to screw this up.
“There’s an imminent amount of good logic and sense in preserving the current tax rates for 98 percent of Americans for a lot of reasons. One of which is the gross domestic product dependent on consumer spending,” Obama continued. “We need to separate the tax rates for the top 2 percent as an issue from the tax rates of everybody else. That’s so-called decoupling is really important and it’s something that i think the Republican Party increasingly sees as necessary for its own image.”
