There’s another significant cloud hanging over the market. Congress and the White House are trying to hammer out an agreement on government spending and tax rates before Jan. 1. If they don’t, lower government spending and higher taxes will kick in, a situation that’s been nicknamed the “fiscal cliff.”
House Speaker John Boehner said Friday there had been no progress in the negotiations, and called on President Barack Obama to produce a new offer. Earlier this week, House Republicans had released a plan that would raise tax revenues and cut government spending.
The fiscal cliff is already taking a toll on people’s confidence and making them nervous about spending, said Bernie Williams, vice president of discretionary money management at USAA Investments in San Antonio, Texas. He pointed to recent announcements from retailers like Target and Kohl’s, who both had November sales at established stores shrink even though analysts had expected them to rise.
“There are more things on the plate to worry about than normal,” Williams said. “The consumer is weak, their confidence is being hit by the fiscal cliff, and then more importantly, you look ahead to next year and all the taxes are (likely) rising. … If you’re a paycheck-to-paycheck person, that’s going to hurt.”
Traders have been indecisive as well. In the 21 trading days since the presidential election, the Dow has been up 10 and down 11. So far this week, it’s finished up twice and down twice.
Among stocks making big moves:
—Apple was down $14.45 to $532.79, more than 2 percent. That’s part of a longer trend: Apple’s stock has plunged nearly 24 percent since the iPhone 5 went on sale Sept. 21 as investors wonder whether the company can keep the momentum going with its popular iPhone and iPad devices. Apple makes up 4 percent of the S&P 500 index and nearly 12 percent of Nasdaq, so how it fares can have an enormous effect on the rest of the market.
—AIG, the bailed-out insurance company, rose 2 percent, up 68 cents to $33.94. A group of Chinese companies is in talks to buy AIG’s aircraft leasing unit, which could help AIG raise cash to pay off more of its government loans.
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