Markets face some weakness as we move through the second week of December. Traders seem eager to reduce some risk and lock in profits ahead of the new year. Though the economic calendar is quiet, here are three things driving the market:
General Motors
The automaker grabbed headlines and traders’ attention this week with two major stories. First, the U.S. Treasury said Monday it had sold its remaining 31.1 million common shares of General Motors, marking the end of taxpayer ownership in the company. Although this sale removes one overhang on the stock, a Canadian government entity still owns about 109.9 million common shares. Some analysts expect the Canadians to exit in 2014.
Then on Tuesday GM announced that CEO Dan Akerson will retire on January 15 and be succeeded by current head of product development Mary Barra. The appointment marks the first time a woman has been tapped to lead an automaker. GM shares were down by 0.87% in Tuesdays session.
Debt Ceiling, Act II
When Congress passed the “Continuing Appropriations Act 2013” in mind-October, it effectively postponed the imposition of the “debt ceiling” until February 7, 2014. While the debt ceiling had somewhat faded from the headlines since then, it leapt back into the markets’ view this week. On Wednesday morning markets woke up to news that Democratic and Republican lawmakers had reached a budget agreement that would avoid another government shutdown.
While relatively moderate in scope, the deal should at least bring a little fiscal stability to the government over the next few years. The “compromise” calls for a $63 billion increase in spending in 2014 and 2015, coupled with $85 billion in deficit reductions over the next 10 years, resulting in a net deficit reduction of $22.5 billion. Most observers assume the plan will easily pass through both chambers of Congress.
The Santa Claus Rally
“The Santa Claus Rally” is a phrase used loosely to describe the late year rally that equities often see in late December and the first few days of the new year. Some credit this to a general exuberance created by Wall Street traders eager to invest year-end bonuses. Others say it results from people trying to buy stocks in anticipation of a rise in January stock prices (known as the “January Effect”).
Considering the downturn the market took during the first few days of this month, as well as the recent market weakness, there is no guarantee that the Santa Claus Rally will make it down the markets’ chimeny this year.
Weekly Bonus – Person of the Year
This week Time Magazine bestowed its “Person of the Year” for 2013 on Pope Francis, crediting him with “shifting the message of the Catholic Church while capturing the imagination of millions of people who had become disillusioned with the Vatican”. This marks the third instance Time has chosen a pope: Pope John Paul II in 1994 Pope John XXIII in 1963.
Other finalists included Syrian President Bashar al-Assad and marks the third instance Time has chosen a pope: Pope John Paul II in 1994 Pope John XXIII in 1963. Other finalists included Syrian President Bashar al-Assad and U.S. Senator Ted Cruz from Texas.
