Last week on Wall Street, stock prices fell, but their slight increase on Friday, following the start of negotiations over budget issues in the U.S., raises hopes that the market could soon stabilize and even recover.
The Dow Jones index weakened by 1.8 percent last week, to 12,588 points, while the S&P 500 fell by 1.5 percent, to 1,359 points, and the Nasdaq index by 1.8 percent, to 2,853 points. For the S&P index, this marks the second consecutive weekly loss, while the Dow Jones has slipped for the fourth week and the Nasdaq for the sixth consecutive week.
This is a consequence of investors’ fears of automatic cuts in budget expenditures and tax increases at the beginning of next year, which could push the U.S. economy into recession if Republicans and Democrats do not agree on better solutions by the end of the year.
However, on Friday, stock prices slightly rose as the first meeting on budget issues was held in Washington. After discussions with President Barack Obama, congressional leaders from both parties stated they were ready to negotiate to avoid the ‘fiscal cliff.’ However, on the table is, among other things, an increase in capital gains taxes and dividends, and Obama seems to be aiming to make the tax system more progressive.
Republicans, on the other hand, do not want to support tax increases and share the responsibility for pushing the economy over the cliff. All of this recalls the deadlock that Democrats and Republicans found themselves in August 2011 while tussling over raising the debt ceiling.
