Fiscal Cliff Anxiety

Washington, D.C.

Equities are heading lower in early trading after Wall St. continues to digest the comments yesterday from Sen. Harry Reid (D. Nev.) about little progress being made with U.S. budget negotiations on Capitol Hill.

Senator Reid  announced yesterday there had been little progress made in dealing with “fiscal cliff” negotiations, signaling a change in tone from two weeks ago when fiscal negotiations began and lawmakers appeared more willing to compromise than previously expected, triggering the rally in equities last week.

Lawmakers have until Jan. 1, 2013 to reach an agreement to avoid automatic tax increases and spending cuts being triggered.

There is some “political theater” occurring between Republicans and Democrats on Capitol Hill in the showdown over compromises about tax increases, government spending, and budget cuts (E.G. Medicare, defense spending) which is causing some investors to move their cash to the sidelines until more clarity emerges from Washington D.C. over budget negotiations.

Both parties are expected to give in a little to achieve a grand compromise.  

Some U.S. companies like Costco are making special year end dividend payments because investors may soon have to pay higher taxes on dividend income beginning in January.

The move by Costco will provide their investors with the final opportunity to pay the lower 15% tax rate currently in effect on dividends.

Costco announced plans to issue a special  $3 billion dividend of $7 per share in December in addition to the regular quarterly dividend.

The special dividend will be payable Dec. 18 to shareholders on record Dec. 10th.

Housing Data

U.S. October new home sales fell .3% to a seasonally adjusted 368,000 after an 0.8% rise in September. 

The National Association of Realtors said on Monday that October home sales rose 2.1 percent to a seasonally adjusted annual rate of 4.79 million, up from 4.69 million in September.

 

About Johnathan Schweitzer 1565 Articles

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