Wall Street set to open lower on "fiscal cliff" uncertainty
By Angela Moon | November 29, 2012 1:35 AM EST
Wall Street was set for a lower open on Wednesday, putting the S&P 500 on course for a third straight day of decline, as investors remained on edge given the lack of details on U.S. budget talks.
The decline came despite encouraging corporate news, including Costco's special dividend and a merger proposal for Knight Capital.
Investors will get readings on new-home sales and the Federal Reserve's Beige Book view of the economy later on Wednesday, but the market is mainly focused on the negotiations about long-term federal budget deficit reduction.
Obama's meeting with influential leaders from the corporate world is part of his push for Congress to extend tax cuts for middle income Americans, one flashpoint in a standoff with Republicans in Congress over a series of tax hikes and spending cuts, dubbed the "fiscal cliff," that will go into effect next year if lawmakers and the president cannot come up with a deal to stop them.
"These CEOs know that the market will sell off without any resolution, so I think it's encouraging that they are meeting with the president," said Sal Arnuk, co-founder at Themis Trading at Chatham, New Jersey.
One possible result of the deficit reduction talks is a rise in the tax rate on dividends, prompting some firms to issue special dividends or move up plans for dividends.
The latest example is retailer Costco Wholesale Corp
U.S. stocks slid on Tuesday after Senate Majority Leader Harry Reid expressed disappointment that there has been "little progress" in dealing with the fiscal cliff.
S&P 500 futures were down 7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 39 points and Nasdaq 100 futures were down 8.75 points.
Knight Capital Group Inc
Deep divisions at the Federal Reserve were on display on Tuesday, just two weeks before the U.S. central bank's next policy-setting meeting, with one top Fed official pushing for more easing, and another advocating limits. The Fed will release its Beige Book summary of regional economic conditions at 2 p.m. (1900 GMT).
New home sales data is due at 10 a.m. (1500 GMT). Economists in a Reuters survey forecast a reading of 390,000 for October versus the previous reading of 389,000.
Green Mountain Coffee Roasters Inc
(Reporting By Angela Moon; Editing by Kenneth Barry)
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