It was a light session today on New Year's Eve, but fiscal budget headlines dominated the action. Late on Friday, US equity futures continued to plunge during the after hours session, leading to a 13 point difference versus the S&P cash index. In the morning, congressional sources began leaking that Congress had made significant progress on the deal. Eventually, during President Obama's afternoon press conference, this led to a continued rally of over 1% for S&P 500 stocks.
The basis of the deal was an increase in income tax and tax on investment income for individuals earning over $400,000 and households earning over $450,000. However, no concrete deal had been agreed upon by the close of equity trading. Late in the day, Senate Minority Leader McConnell said that an agreement had been reached regarding the tax issues for the budget deal, but sequestration (spending) cuts were still a flashpoint.
Fixed income trading closed early, but weakness in Treasuries, coinciding with equity strength, was the trade for the day. The Treasury curve steepened as the 30-year bond fell over 1 point to a yield of 2.95% while the two- and three-year yields stayed flat. Precious metals and energy also rallied with equities, each gaining over 1%.
Tomorrow's Financial Outlook
US and European equity markets will be closed tomorrow for New Year's Day and will reopen again on Wednesday. On Wednesday, the ISM will release its manufacturing index and vehicle sales will be released in the afternoon. In Europe on Wednesday, the eurozone and the UK will release manufacturing PMI indexes.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.