The Dow finished down 18 points, making up most of a 150-plus loss earlier in the session. What seemed to turn things around was word that the House would reconvene Sunday night in a possible 11th-hour effort to avoid automatic tax increases and spending cuts on January 1. The current thinking seems to center on having the Senate pass some sort of minimalist package and then sending it over to the House, where a group of Republican and Democratic moderates could eke out passage. The House is set to vote early Sunday evening on something - specifics will probably be kept under wraps for as long as possible so that opponents won't have time to marshal their forces. Is this wishful thinking or something more? From the WSJ's Jerry Seib:
The most logical way to get something done quickly would be for Sen. Reid to take a bill the House passed a while back, which extended current tax rates for everybody; adjust it to reflect Democrats' wishes to extend current rates only for families making less than $250,000 a year and allowing rates to rise for others; jam in some other eleventh-hour fixes such as extending exemptions to the Alternative Minimum Tax and continuing expanded unemployment insurance benefits; pass it in the Senate, and then send it back to the House. One uncertainty in this scenario is whether Mr. McConnell would stand aside and let such a bill hit the Senate floor without objections or tactics to stall it. The benefit of the plan for Republicans is that they wouldn't have to do anything proactively to let it move forward except stand aside and allow it to proceed. And they wouldn't actually have to vote to raise anybody's tax rates. They'd vote only to keep rates at current rates for most people, and rates on wealthier Americans would simply rise automatically.
If nothing else, today's market behavior illustrates how closely investors are following the back-and-forth out of Washington (much as they were following last year's European debt talks). The Dow has been falling over the past week or two, but it's still over the 13,000 mark.