The major Canadian and U.S. stock market indexes were posting gains at midday, masking a tremendous amount of unease among investors as they monitored the latest efforts to avert the impact of the U.S. "fiscal cliff."
At 125 p.m. (ET), the S&P/TSX composite index was up 71 points, or 0.5 per cent, at 12,387; the S&P 500 was up 11 points, or 0.8 per cent, at 1,414; and the Nasdaq was up 36 points, or 1.2 per cent, at 2,996. The Dow Jones industrial average was up 63 points, or 0.5 per cent, at 13,001. Gold was gaining strength, too, up $21.40 at $1,677.
The midnight ET deadline tonight to avoid the more than $600-billion in tax hikes and spending cuts will clearly not be met, given that the legislation would have to be passed by both U.S. houses. But there's hope that an agreement could be reached shortly and then enacted quickly enough early in the new year for little impact to be felt in the economy.
There were some promising signs that negotiators for the Democrats and the Republicans were narrowing their differences today. The Associated Press reported that talks between Vice President Joe Biden and Senate Republican leader Mitch McConnell are now centered on just one sticking point: whether to postpone spending cuts that are scheduled to begin Tuesday. Republicans are pressing to replace across-the-board reductions with targeted cuts in the budget.
The two sides were also said to be closing in on an agreement over taxes. According to the AP, the White House has offered blocking an increase for most Americans, while letting rates rise for individuals with incomes of $400,000 a year and $450,000 for couples. President Barack Obama had campaigned on the promise to set the thresholds at $200,000 and $250,000, respectively.
Despite the hints of progress, Senate Majority Leader Harry Reid said late this morning that differences remain, and that cooperation would be needed by both sides to get a deal done.
Markets are now waiting to hear what Mr. Obama has to say at 130 p.m. (ET), when he is expected to make a statement on the "fiscal cliff" talks from the White House.
At the TSX, materials was the top gainer, up about 0.8 per cent, getting a boost from more encouraging economic data out of China. The Shanghai composite index rose 1.6 per cent overnight to a six-month high after HSBC and Markit figures showed that the nation's factory activity hit a 19-month high in December. The year's final purchasing managers' index hit 51.5, up from 50.5 in November when the figure returned to growth after 12 consecutive months of contraction.