Waiting on fiscal cliff compromise, stocks inch up
NEW YORK (AP) — The stock market ended higher Thursday after flipping between small gains and losses throughout the morning. Uncertainty about the "fiscal cliff," just days away, was top of mind for many traders.
The Republican-controlled House pushed ahead with a bill aimed at averting the "fiscal cliff," but President Barack Obama has threatened to veto it and Democratic leaders in the Senate vowed to let it die.
Many traders now expect that the Republicans and Democrats won't reach an agreement before Christmas. The political haggling kept markets muted, and trading volume was low.
"Every time someone makes a speech, you get another move in the market," said Ben Fischer, founder and managing director of NFJ Investment Group in Dallas. "Everyone's just tracking it on a very short-term basis."
The Dow Jones industrial average fell as much as 36 points before ending the day higher, rising 59.75 points to close at 13,311.72. Other indexes followed similar patterns. The Standard & Poor's 500 rose 7.88 to 1,443.69. The Nasdaq composite index rose 6.02 to 3,050.39.
In Washington, the Republicans offered in their "Plan B" to raise taxes on the wealthy, but Democrats complained that it would not address the steep budget cuts that are automatically set to occur for military and domestic agencies.
If the Republicans and Democrats don't work out a compromise before the end of the month, the U.S. could go over the "fiscal cliff," a reference to big tax increases and government spending cuts that would automatically kick in if no budget deal is in place. Some economists fear that would push the U.S. back into recession.
But even a successful compromise is no guarantee that the market will soar. The market already assumes that a budget compromise will be reached, Fischer and others said, evidenced by its more-or-less steady increase since mid-November.
A compromise "doesn't make everything better," said Tim Biggam, market strategist with the brokerage TradingBlock in Chicago. "It just stops things from getting worse."
Biggam predicted that the economy's growth next year will remain anemic. Problems that the headlines over budget impasse have pushed out of the public consciousness, like the European debt crisis, still need to be resolved, he said.
"All the fears that we were worried about not too long ago," he said, "have not gone away."