From The Associated Press
NEW YORK —
Investors drew little hope Wednesday for a quick compromise in U.S. budget talks after President Barack Obama insisted that higher tax payments from wealthy Americans would have to be part of any deal.
Stocks fell, and even signals from the Federal Reserve that it would increase its bond-buying program failed to lighten the mood.
The Dow Jones industrial average was down 132 points at 12,624 at 3 p.m. EST. It was down 83 points before Obama began a news conference at 1:30 p.m.
Obama made it clear that he would stick to his position of seeking higher tax payments from the wealthiest Americans, which faces opposition among Republicans in Congress. Obama said that a modest increase on the wealthy “is not going to break their backs.”
“The Street was looking for him to say some magic buzzwords about avoiding the fiscal cliff, about co-operation,” Sal Arnuk, of Themis trading, a brokerage firm in Chatham, New Jersey. Instead his comments were “very consistent with some unyielding positions he’s had over the years.”
In other trading, the Standard & Poor’s 500 index slipped 13 points to 1,362 and the Nasdaq composite was down 24 points at 2,860.
Stocks were roiled in the immediate aftermath of last week’s presidential election on concern that the U.S. will fall over the “fiscal cliff.” Unless lawmakers hammer out a deal to cut the budget deficit by Jan. 1, a series of tax increases and revenue cuts will be implemented that will likely push the U.S. back into recession.
“Investors’ hopes that the election would end uncertainty remain unfulfilled,” said Lawrence Creatura, a portfolio manager at Federated Investors in Rochester, New York. “Investors are still grasping for visibility....it’s very tough to determine what happens next.”
Obama said Wednesday that he would not to cave to Republicans who have pressed for tax cuts first passed by George W. Bush to be extended for all income earners. Obama has long opposed extending the cuts for families making more than $250,000 a year, but he gave into GOP demands in 2010 when the cuts were up for renewal.
The President is also meeting with business leaders Wednesday to discuss the economy.
The S&P 500 has fallen 3.7 percent since Obama won re-election Nov. 6, and has dropped 6.5 percent from Sept. 14, when it hit the highest point of the year. Stocks had risen over the summer before the Federal Reserve announced Sept. 13 that it would extend its so-called quantitative easing program by buying mortgage-backed securities with the intention of holding down borrowing costs.
Abercrombie & Fitch, the purveyor of apparel to teenagers, was among the standout stocks. Abercrombie jumped $9.53 to $40.69 after reporting that its international business was thriving and that its net income soared 40 percent in the most recent quarter, more than analysts were expecting.
The strong results from Abercrombie were tempered by a report from the Commerce Department saying that Americans cut back on spending in October, suggesting that many are still cautious about the economy.
Sales dropped 0.3 percent last month after three months of gains. That’s worse than analysts had been expecting, according to FactSet. The government also said auto sales fell 1.5 percent, the most in more than a year. Sales may have been hurt by Superstorm Sandy.
The minutes of the Federal Reserve’s October meeting were also released Wednesday afternoon. The Federal Reserve suggested that it may start a new bond buying program to try and spur job growth. The purchases are intended to lower long-term borrowing rates to encourage spending and strengthen the economy. The hope is that more hiring would follow.
The yield on the 10-year Treasury note was unchanged at 1.59 percent.
Among other stocks making big moves:
Cisco Systems, the world’s largest maker of computer networking equipment, gained 96 cents to $17.85. Cisco said late Tuesday that its earnings rose 18 percent in the latest quarter and that U.S. companies are starting to spend again.
Mosaic, a company that mines for potash, a key ingredient in fertilizers, slipped $1.31 to $49.95 after saying that international demand for its product had weakened and that it was lowering its sales forecasts.
Advanced Micro Devices, a chipmaker, slumped 11 cents, or 5.3 percent, to $1.98 after the company denied a report that said it was considering a sale. The stock has lost about 76 percent of its value since reaching a 52-week high of $8.35 in March as the company’s sales dwindled as consumers shift away from PCs to tablets and smartphones.
Facebook jumped $2.21 to $22.06 on the day that a lock-up on stock held by former employees expired. Youssef Squali, an analyst at broker Cantor Fitzgerald, wrote in a note that investors should take advantage of any “market dislocation” in the stock to buy more of it.