NEW YORK (AP) -
An early rally faded on Wall Street after
President Barack Obama said he would stick to his pledge to seek higher
taxes from the wealthy as part of his plan to reduce the U.S.
government's budget deficit.
Investors worried that his
position, which is opposed by many Republicans in Congress, could augur
more political wrangling in Washington and the possibility that Congress
won't act in time to avoid a series of drastic spending cuts and tax
hikes that are set to kick in at the beginning of next year.
The Dow Jones industrial
average had been up as much as 79 points before 1 p.m., when Obama began
speaking. Much of the gain came after House Speaker John Boehner made
his own remarks on the "fiscal cliff" issue late in the morning.
Most of the Dow's gain
evaporated within an hour. As of 3 p.m. the Dow was up nine points at
12,821. The Standard & Poor's 500 index was up five points at 1,382
and the Nasdaq composite was up 15 points at 2,911.
"We will get a compromise
with the fiscal cliff," said Chris Bertelsen, the Chief Investment
Officer at Global Financial Private Capital, based in Saratosa,
Florida. "But it could well be the conventional U.S. political way of
doing it - the last minute type of stuff - in which case the markets
will be haunted by it until the point it happens."
The market is coming off
its worst two-day slide in a year. The Dow average plunged 434 since
President Barack Obama won re-election as investors turned their focus
to a deadline at the end of the year for Congress to act on reducing the
budget deficit.
If it doesn't, the deep
spending cuts and tax increases will occur automatically, potentially
derailing the U.S. economy. The Congressional Budget Office said
Thursday that the measures, if implemented, would likely push the
economy back into recession.
The dimming outlook for
Europe also weighed on markets this week. The European Commission, the
executive arm of the European Union, slashed its forecast for economic
growth in the region Wednesday.
The yield on the 10-year Treasury note rose to 1.62 percent from 1.61 percent late Thursday.
Among stocks making big moves:
- Online deals company
Groupon slumped $1.17 to $2.75 after the company disclosed late Thursday
that it was hurt by the economic problems in Europe.
- J.C. Penney dropped $1.33
to $20.36 after the company reported a loss that was larger than
investors were expecting. Shoppers have been abandoning the store after
it got rid of blockbuster sales in favor of everyday low prices.
- Kayak Software surged $8.63 to $39.67 after the company said it had agreed to be bought by rival travel website Priceline.com.
