EmailThe back and forth continues on the fiscal cliff debate while the equity market just continues on. Yesterday, the S&P 500 advanced 1.2%, finishing with a flurry of buying interest and closing at its high for the session.
Coincidentally, the late surge mirrored a late surge in shares of Apple (AAPL), which went out near their best level of the day and up 3.5% from their intraday low.
AAPL is indicated 1.1% higher in premarket action, aided by a few brokerage firms coming to its defense. That has helped the S&P futures (+0.1%) given the weight Apple carries in the index.
Another source of support reportedly is the news that President Obama made a counterproposal to the plan put forth over the weekend by House Speaker Boehner. Under the president's proposal, income tax rates would go up at the $400,000 income level (versus his previous call at the $250,000 level).
The president's new proposal would increase revenue by $1.2 tln and cut spending by $1.22 tln over the next ten years, which includes $230 bln of savings from the interest paid on debt and a change in the way inflation is calculated for determining Social Security cost-of-living adjustments. In addition, the president wants the debt ceiling raised enough to cover spending for the next two years.
The word this morning from unnamed Republican aides is that the new proposal has been rejected by Speaker Boehner on various grounds. One of the primary objections is that the proposed debt ceiling increase isn't matched dollar-for-dollar with new spending cuts. Other Republicans have also voiced their objections to the new proposal this morning.
Nonetheless, the market appears taken with the idea that new proposals are at least being advanced by both sides that differ from prior versions, suggesting last week's stalemate in the negotiation process has ended.
The compromise everyone is waiting for, however, remains elusive. At this point, it is still all talk and no legislative action as the December 31 drop date draws near.
The S&P futures have moved off earlier highs, yet the cash market is anticipated to open about 0.4% higher. It is possible follow-through buying efforts will be stymied soon thereafter with techincal resistance coming into play between 1433 and 1440.
Apple might be the swing factor there along with the financials, which have acted very well of late. On a related note, Meredith Whitney reportedly upgraded Citigroup (C), Bank of America (BAC), and Discover Financial Services (DFS).
In other news, Japan's stock market (+1.0%) continued its hot streak; bad loans in Spain hit a new high in October; and China is said to be targeting 7.5% GDP growth in 2013 (the OECD forecast is 8.5%).
The US current account deficit narrowed to $107.5 bln in the third quarter (Briefing.com consensus -$104.2 bln) from $118.1 bln in the second quarter.
