Futures sharply lower on failed fiscal cliff deal

The Republicans tax bill failed to pass, meaning budget talks are ongoing.

By Benzinga Dec 21, 2012 9:25AM
zurbar age fotostockU.S. equity futures traded sharply lower overnight as House leader Boehner failed to gain enough votes to pass his Plan B to avoid the fiscal cliff. It is now unlikely that an agreement will be reached before Christmas, meaning leaders will have nearly one week to solve the crisis before going over the cliff.

In other news, the U.K. economy had its third quarter GDP growth figures revised lower in the latest estimate, with the government reporting that the economy grew 0.9% in the third quarter, less than the previous estimate of 1.0% growth for the quarter.

Japan's Ishiba, a leader of the newly elected LDP party, has stated that the party should target USD/JPY between 85 and 90 in the short-term to help kick-start growth.

Jens Weidmann, ECB Governing Council Member and Bundesbank President, spoke overnight stating that he sees no risks of inflation in the eurozone but that the Bank must act if inflation pressures do rise. Also, he said that the OMT Conditionality is not credible and that the OMT is the first step on a slippery slope.
  • S&P 500 futures fell 23.25 points to 1,417.25.
  • The EUR/USD was was lower at 1.3219.
  • Spanish 10-year government bond yields rose to 5.273%.
  • Italian 10-year government bond yields rose to 4.491%.
  • Gold rose 0.3% to $1,651.00 per ounce.
Commodities
Commodities were mixed overnight with weakness in energy futures offset by gains in precious metals on hopes of more easing following a smaller chance of resolving the Fiscal Cliff. WTI crude futures fell 1.41% to $88.86 per barrel and Brent crude futures dropped 0.83% to $109.28 per barrel. Copper futures bucked the risk-off trend and actually rose overnight, gaining 0.08% to $353.90 per barrel. Gold was higher and silver futures rose 0.98% to $29.98 per ounce.

Currencies
Currency markets were in clear risk-off mode overnight as the dollar and the yen reigned. The EUR/USD was lower at 1.3219 and the dollar fell against the yen to 84.11. Overall, the Dollar Index rose 0.08% on strength against the euro, the pound, the Swiss franc, the Canadian dollar and the Swedish krone. Also, the Aussie dollar was broadly weak, marking another sign of risk-off and other growth currencies tracked lower overnight.

Premarket movers
Stocks moving in the premarket included:
  • Arcelor Mittal (MT) shares fell 3.2% premarket after the company reported that it will take a large, $4.3 billion write-down of assets.
  • AIG (AIG) shares fell 2.65% premarket because a breakdown in fiscal cliff negotiations means that the U.S. faces another downgrade, which could trigger credit default swaps of which AIG is most likely a seller.
  • JPMorgan Chase (JPM) led big banks lower overnight, dropping 1.41% premarket on the breakdown in fiscal cliff talks.
  • Peabody Energy (BTU) shares fell 2.36% premarket on weakened demand for coal exports abroad.
Earnings
Walgreen Company (WAG) is expected to report first quarter earnings per share of $0.70 vs. $0.63 a year ago.

Economics
On the economics calendar Friday, it is a Quadruple Witching day, meaning stock index futures, stock index options, single stock options, and single stock futures all expire. Also, durable goods orders, personal income, and the Chicago Fed National Activity Index are due out. Later, consumer sentiment and Kansas City Fed manufacturing Index are expected.

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2Comments
Dec 21, 2012 10:11AM
avatar
Great. Lets all go on vacation. Your president is such a leader. 
Dec 21, 2012 9:51AM
avatar
Hey, the House has stood up to the imbecile Obama.  NO TAX increases without large spending reductions.

Obama now has a choice, pass the W tax cuts or watch taxes go up across the board.   It means his 47%, will start having to pay for Obamanomics.  This is a good thing.  The increased taxes will reduce the deficit.  The spending cuts are a good thing.  And the military cuts hurt democrat districts and unions way harder than the rest of the country.  Let them explain the pink slips.

We can then begin real CUTS with the Debt Ceiling increase.   I would suggest the House hold fast at a ratio of $8 in real spending cuts this year for every dollar in  debt ceiling increase.  And if you fail to increase the debt ceiling we will get  spending reduction MUCH faster!
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