Business Update: Fiscal Cliff, Fed Policy, Hostess Bidders
Deadlock in negotiations on Capitol Hill over next year's budget has Wall Street worried about the potential impact of the so-called "fiscal cliff." In this week's Business Update, KOMU 8's Katie Brennan explains how the fiscal cliff threat is overshadowing positive economic news.
U.S. Markets closed down for the first time in a month as investors lose patience with politicians and the threat of the fiscal cliff creeps closer.
President Barack Obama and Republican House Speaker John Boehner met for a third time to discuss next years budget, but failed to come to an agreement. If they don't before January, more than $600 billion in tax increases and spending cuts will be a hard hit the already weak economy.
Frustration over the deadlock in Washington overshadowed an unprecedented move by the Fed to tie 0% interest rates to specific unemployment and inflation goals. Chairman Ben Bernake announced Thursday the Fed will extend its bond-purchasing program and keep official rates near zero for as long as unemployment remains above 6.5 percent. He noted the threat of the fiscal cliff is already hurting the economy.
"Even though we've not yet even reached the point of the fiscal cliff potentially kicking in, it's already affecting business investments and hiring decisions by creating uncertainty or creating pessimism," said Bernanke.
Investors certainly share that sentiment. The S&P 500 was down 0.3 percent for the week to 1,413. The Dow fell 0.2 percent to close at 13,135. The NASDAQ fell 15 points to 2,971.
There was some potentially positive news for Missourians last week.
Bloomberg News reported Walmart and Kroger are among dozens of companies bidding to take over assets of Hostess. You may recall hundreds of Hostess employees in Boonville and Saint Louis lost their jobs when the bankrupt company closed its bakeries across the county as it began liquidating its assets in November. A buyout by Walmart or Kroger could mean some of those workers getting their jobs back. Both companies are staying quiet and the bidding process is confidential so we'll have to wait and see how it plays out.
The weeks leading up to Christmas are typically quiet on Wall Street, but investors will keep their eyes on Capitol Hill.
If lawmakers come to an agreement, we'll keep you updated on how Wall Street reacts.