Wall Street finished the week up despite “fiscal cliff” turmoil, with traders poised to keep a close eye on the crisis during the final days of the year.
With an end-of-year deadline just days away, sparring Washington politicians have yet to strike a compromise that will keep a mix of tax hikes and spending cuts from taking effect on Jan. 1.
Experts warn that going over the fiscal cliff could take the world’s biggest economy back into recession.
“The focus is on Washington,” Hugh Johnson of Hugh Johnson Advisors said. “The concern is clearly that we’ll go off the ‘cliff’ and as the [US] Congressional Budget Office said, correctly warned, there will be a recession in 2013.”
For now, US markets are still in positive territory despite seeing a drop on Friday after Republicans rejected a bid to pass a backup bill to solve the crisis, leaving Washington in limbo.
For the week, the 30-stock Dow Jones Industrial Average gained 0.43 percent to 13,190.84, while the tech-heavy NASDAQ Composite climbed 1.67 percent to 3,021.01. The broad-based S&P 500 went up 1.17 percent to 1,430.15.
In non-fiscal cliff market news, the past five sessions saw an upward revision of third-quarter GDP, a three-year high in existing home sales, as well as an uptick in consumer spending, personal income and durable goods orders.
With markets closing early on Monday and shut on Tuesday due to the Christmas holiday, action is expected to be light in the coming days — especially since lawmakers are not due back in town until midweek.
“The primary driver will be what comes out of Washington or the lack thereof,” David Levy of Kenjol Capital Management said.
Painting a broader picture, Levy said traders were closing their books and calling it a year.
“We are already seeing light volumes, which magnifies market movement, but in addition to that, the market had a very good year so investors are taking profit and moving to the sidelines as they wait to see what happens next,” he added.
Next week will see the release of the latest Case-Shiller home price index, as well as figures on new US home sales and consumer confidence.