NEW YORK – Wall Street is peering over the fiscal cliff and feeling vertigo.
The stock market finished one of the worst weeks of the year Friday, pushing Washington to work out a deal to avoid the tax increases and government spending cuts set to take effect Jan. 1.
Remarks by re-elected President Barack Obama and House Speaker John Boehner on the looming deadline didn’t do much to cheer the market. Stocks finished barely higher for the day.
Chris Bertelsen, the chief investment officer at Global Financial Private Capital of Sarasota, Fla., said he expects Congress and Obama to reach a compromise to avoid the fiscal cliff.
“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,” he said.
Stocks began their slide Wednesday in the biggest sell-off of the year after voters returned Obama, a Democratic Senate and a Republican House to power. Investors immediately turned to worrying about the cliff.
If the tax increases and spending cuts take full effect, the U.S. will likely fall back into recession, the Congressional Budget Office said Thursday.
Boehner said Friday that he remains unwilling to raise tax rates on upper-income earners. But he left open the possibility of balancing spending cuts with revenue increases that come from some revisions to the tax code.
Stocks managed a small rally. The Dow was up about 30 points when Boehner started talking and about 80 points shortly after.
Then Obama said he would not accept any approach to federal deficit reduction that doesn’t ask the wealthy to pay more in taxes. A spokesman later said Obama would veto legislation extending tax cuts for families making $250,000 or more.
The Dow began sliding just before Obama spoke, at 1 p.m., and had lost its gain for the day by 1:30.