- Taper bets increase after budget accord
- Obama pledges to sign deal if Congress approves
- Markets suffer worst losses since November 7th
- Costco fails to hit forecasts in Q1
Dow Jones: -0.81%
S&P 500: -1.13%
US markets finished with steep losses on Wednesday on concerns that a budget deal in Washington would remove one more obstacle standing in the way of a Federal Reserve's decision to taper stimulus.
The Dow Jones Industrial Average, Nasdaq Composite and S&P 500
indices all registered their worst daily losses since November 7th.
Chief Congressional negotiators Senator Patty Murray and Representative Paul Ryan last night worked out a deal that would set spending at about $1.01trn in the current fiscal year, up from the $967bn required in a 2011 budget plan. The budget still needs to be passed in both the Senate and the House.
If passed, it will end three years of impasse and fiscal instability in Washington that culminated in October with a partial government shutdown. The budget comes before a non-binding Friday deadline and more than a month before the January 15th date when existing funds to run many federal programmes expire.
President Barack Obama labelled the agreement as "a good first step" and said he would sign the deal into law if it is passed by Congress.
According to analyst Michael Gapen from Barclays, the agreement will cut the estimated drag from fiscal policy next year in half and, if passed, "would lead to a modest direct boost to gross domestic product (GDP) and some upside risk to our forecast of 2.4% for real GDP growth in 2014".
However, he said that while the deal reduces the potential for fiscal brinkmanship surrounding the budget, it "does not provide for an increase in the debt ceiling past February 7th, nor does it address longer-term structural budget issues".
Nevertheless, with Fed officials recently citing the negative impact that fiscal policy has had on the economy, some analysts believe that this new accord supports the case for a scaling back of stimulus at the central bank's policy meeting on December 17th-18th.
Michael Hewson, Chief Market Analyst at CMC Markets, said: "There was [...] the prospect that having removed a potential road block to further political dysfunction in the New Year, prospects of some form of action from the [Fed] next week had increased, which [...] appear[ed] to be weighing on risk appetite."
Economic news was thin on the ground on Wednesday; however, one important indicator showed that the US federal government recorded a budget deficit of $135.2bn in November, below the consensus forecast of $140bn and 21.4% less than a year ago.
Costco misses estimates
Costco Wholesale declined as the US warehouse-club chain said net income rose to $425m or 96 cents a share in its first quarter, up 2.2% year-on-year but below the 102 cents expected by analysts. Revenue grew 5.5% to $25.02bn but this also missed the forecast for $25.35bn.
Mastercard jumped after saying its board of directors approved an 83% dividend increase.
Avanir Pharmaceuticals dropped after the drugmaker said a phase II study of AVP for the treatment of multiple sclerosis did not meet the primary efficacy endpoint.
Cisco retreated after losing a European Union (EU) General Court bid to overturn EU approval of Microsoft Corp.'s 2011 takeover of Skype Technologies. The stock was also started at 'sell' on Wednesday by analysts at Citigroup.
S&P 500 - Risers
Scripps Network Interactive Inc. (SNI) $81.00 +7.64%
Mastercard Inc. (MA) $790.57 +3.53%
Visa Inc. (V) $205.66 +3.12%
Urban Outfitters Inc. (URBN) $36.84 +3.08%
Iron Mountain Inc. (IRM) $29.17 +2.21%
Walgreen Co. (WAG) $57.68 +1.91%
Gannett Co. Inc. (GCI) $25.98 +1.80%
AbbVie Inc (ABBV) $52.67 +1.02%
Dollar General Corp (DG) $61.31 +0.94%
Altria Group Inc. (MO) $37.67 +0.94%
S&P 500 - Fallers
Laboratory Corporation of America Holdings (LH) $88.25 -10.99%
Quest Diagnostics (DGX) $55.20 -5.80%
Electronic Arts Inc. (EA) $21.08 -4.44%
Avon Products Inc. (AVP) $17.03 -4.43%
Salesforce.Com Inc. (CRM) $51.43 -4.26%
Tenet Healthcare Corp. (THC) $40.78 -4.16%
Cliffs Natural Resources Inc. (CLF) $24.01 -4.11%
First Solar Inc. (FSLR) $54.20 -4.05%
Delta Airlines Inc. (DAL) $27.66 -3.86%
Allegheny Technologies Inc. (ATI) $31.93 -3.62%
Dow Jones I.A - Risers
Visa Inc. (V) $205.66 +3.12%
Coca-Cola Co. (KO) $40.13 +0.70%
Home Depot Inc. (HD) $79.00 +0.50%
Procter & Gamble Co. (PG) $84.02 +0.44%
Wal-Mart Stores Inc. (WMT) $79.09 +0.01%
Dow Jones I.A - Fallers
Nike Inc. (NKE) $76.84 -3.00%
Pfizer Inc. (PFE) $30.65 -2.20%
United Technologies Corp. (UTX) $108.66 -2.09%
General Electric Co. (GE) $26.58 -2.06%
E.I. du Pont de Nemours and Co. (DD) $60.29 -1.87%
American Express Co. (AXP) $83.90 -1.63%
Intel Corp. (INTC) $24.42 -1.61%
Cisco Systems Inc. (CSCO) $20.88 -1.56%
Travelers Company Inc. (TRV) $87.10 -1.52%
Exxon Mobil Corp. (XOM) $94.26 -1.51%
Nasdaq 100 - Risers
Nuance Communications Inc. (NUAN) $14.25 +1.21%
Dentsply International Inc. (XRAY) $48.49 +0.87%
Whole Foods Market Inc. (WFM) $56.18 +0.85%
Broadcom Corp. (BRCM) $28.68 +0.60%
Dollar Tree Inc (DLTR) $55.90 +0.47%
Sigma-Aldrich Corp. (SIAL) $89.65 +0.34%
Netflix Inc. (NFLX) $363.98 +0.24%
Mondelez International Inc. (MDLZ) $34.08 +0.06%
Applied Materials Inc. (AMAT) $16.83 +0.00%
Nasdaq 100 - Fallers
Randgold Resources Ltd. Ads (GOLD) $65.30 -3.91%
Baidu Inc. (BIDU) $173.24 -3.72%
Intuitive Surgical Inc. (ISRG) $366.62 -3.40%
NetApp Inc. (NTAP) $40.06 -3.38%
Gilead Sciences Inc. (GILD) $70.61 -3.02%
Sirius XM Holdings Inc (SIRI) $3.49 -2.92%
Alexion Pharmaceuticals Inc. (ALXN) $121.60 -2.91%
Mylan Inc. (MYL) $41.42 -2.78%
Vertex Pharmaceuticals Inc. (VRTX) $64.39 -2.78%
Micron Technology Inc. (MU) $22.50 -2.77%