EmailThe stock market got hit by a tape bomb yesterday afternoon when newswires reported that Senator Reid said he was disappointed in the lack of progress on fiscal cliff talks. That revelation put the market on notice that the spirit of bipartisanship espoused before the Thanksgiving holiday is threatening to turn malevolent at the behest of partisan politics.
Whatever the case may be, the market did not like getting spooked by the idea that the path to a compromise is running into ideological roadblocks with the January 1 deadline quickly approaching.
It will be interesting to see if another party leader on either side of the aisle attempts to do damage control today with a soundbite that sounds more hopeful. We wouldn't be surprised by such a thing and the market could get a boost from it. The important point to remember is that actions speak louder than words.
What is evident this morning is that there was collateral damage from yesterday's tape bomb. Markets in Asia and Europe went on the defensive today.
Europe's losses, however, aren't just a product of fiscal cliff concerns in the U.S. That is part of it, but the eurozone has its own fiscal problems with which to contend. What is happening -- or not happening -- in the U.S. is only compounding the eurozone's problems.
Misgivings about the validity of the latest bailout/restructuring plan for Greece, combined with reports of Spanish bank restructuring that will lead to more job cuts, the specter of eurozone states taking losses on Greek debt, and word that French unemployment is at a 14-year high have weighed on the euro (-0.4%) and European markets.
Thus far, there isn't any lift in the U.S. market either.
The S&P 500 is indicated to open about 0.3% lower. The early indication, and losses in equity markets abroad, have provided support to the Treasury market where the yield on the 10-year note has dipped to 1.61%.
The New Home Sales report for October (Briefing.com consensus 388,000; prior 389,000) will garner some added attention at 10:00 a.m. ET. The Fed's Beige Book report will follow at 2:00 p.m. ET. Most likely, though, the market's fixation on the fiscal cliff will remain the overriding influence on the market's behavior.
Corporate news is light this morning, although Costco (COST) has made a splash with an announcement that its same-store sales increased 6.0% in November and that it is going to pay a special dividend of $7.00 per share.
Now, if only we could get some special news out of Washington.
