Futures suggest a down open of about 9 points for the S&P 500 index. Hopes for a budget agreement prior to January 1 are fading.
President Obama is meeting with congressional leaders from both parties at 3:00 ET today. That is only one hour ahead of the market close, so there is unlikely to be any news from that meeting that impacts trade. That doesn't mean the market won't be bouncing around on headlines, rumors, and tweets from politicians. Yesterday's volatile ride could continue today.
The reality is that there isn't enough time until January 1 to put together a real bill that passes the Senate then passes the House when it reconvenes Sunday night. There is certainly the possibility, however, that the politicians manage to assemble enough of a "framework for agreement" to allow for a photo op in which everyone claims victory even though the details aren't worked out. That might at least provide some indication as to a likely outcome for capital gains and dividend tax rates.
Of course, then a new Congress is sworn in January 3, and new problems arise.
Uncertainty remains very high and time very short.
Asian markets were higher, and European markets are lower (with the Spanish index -1.9%), but none of that matters much to the US markets. Neither will the Chicago PMI index at 9:45 ET or the pending home sales data at 10:00 ET.
The optimistic viewpoint is that a final bill will pass early next year, and that it will magically address long-term deficit concerns as well as boost the economy in the near term. The harsh reality that is rarely recognized amongst all the pablum that Congress should simply "do the right thing" is that there are legitimate conflicting policy goals of controlling government spending over the long-term so as to restrain the burgeoning budget deficit and not inflicting austerity near-term because it will slow 2013 economic growth.
This is not a puzzle in which there is only one right answer that could easily be achieved if politics were simply set aside. The issues at stake are critical policy issues with major implications for the long-term future of the US economy. The impatient desire to finalize a deal, any deal, is understandable from a market standpoint but may not appear prudent a year from now.
There may be some agonizing days ahead but investors will have to live with tax legislation changes for years to come.