THE last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the “fiscal cliff”.
Last-minute negotiations in Washington on the so-called fiscal cliff – nearly $600bn of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession – are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets.
“A lot of firms are saying to their trading desks, ‘You can take days off for Christmas, but you are on standby to come in, if anything happens.’ This is certainly different from previous years, especially around this time of the year, when things are supposed to be slowing down,” said JJ Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.
This week “is going to be a Capitol Hill-driven market.”
With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington would not come up with a deal before 1 January.
Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 per cent gain for the year. For the past week, though, the S&P 500 slid 0.3 per cent.
This Friday will mark the last so-called “quadruple witching” day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire, so trading could be volatile.