Stocks stuck on fiscal cliff treadmill

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NEW YORK (CNNMoney) -- U.S. stocks drifted lower Friday as investors remain sidelined by political gridlock in Washington.

It's been a rough few weeks for investors, as lawmakers and President Obama engage in brinksmanship over year-end tax hikes and spending cuts. The so-called fiscal cliff could harm the economy at a time when the outlook for growth is already in question.

Economic data released Friday wasn't helping matters much, with a report showing personal income remained unchanged in October, while spending declined by 0.2%.

"That's a concern because the consumer has been a pillar of the economy," said Doug Cote, chief market strategist at ING Investment Management. "The numbers were clearly below consensus and the market didn't like that."

A survey of purchasing managers in the Chicago area improved slightly in November, after two consecutive months of decline. The Chicago PMI inched up to 50.4, moving back above the level indicating growth.

The Dow Jones industrial average fell 0.1%, while the S&P 500 lost 0.2%. The Nasdaq declined nearly 0.3%.

While the Dow and S&P 500 are both on track to end the week little changed, the Nasdaq is headed for a gain of more than 1%.

Related: Fear & Greed Index stuck in neutral

Friday also marks the last trading day of November, which started off with two weeks of heavy selling. But stocks have clawed back from those steep losses over the past couple of weeks, putting the major indexes on pace to end the month right where they started.

And you can blame the fiscal cliff for that.

Speaker John Boehner said Thursday that lawmakers in Congress have made "no substantive progress." A day earlier, he said he was "optimistic" that a compromise will be reached "sooner rather than later."

The talks will go down to the wire and the outcome will either be massive spending cuts and tax increases that kick in automatically, or negotiated spending cuts and tax increases, said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif.

"Either way, all Americans are held hostage by the shenanigans, yes I called it 'shenanigans,' and unprepared investors will be punished," Springer said.

Related: America's debt challenge

A few stocks were making big moves Friday. Shares of St. Jude Medical (STJ, Fortune 500) rallied after the hospital's board authorized a $1 billion stock buyback. Yum! Brands (YUM, Fortune 500) sank after the firm softened its expectations for China, predicting same-store sales in that key market would decline 4% in the fourth quarter.

Zynga (ZNGA) shares also extended their decline Friday, after tumbling 13% after-hours Thursday on news that the terms of its deal with Facebook (FB) had substantially changed.

Verisign (VRSN), the company that makes money off the .com registration, sold off sharply after it said it reached a new agreement with the Commerce Department that bars future price increases.

Meanwhile overseas, Asian markets played catch-up Friday, but were also helped by the approval of a new stimulus package in Japan and expectations of strong Chinese factory data due over the weekend. Extending weekly gains, the Nikkei rose 0.48%, the Hang Seng advanced 0.49% and the Shanghai Composite jumped 0.85%.

European stocks ended modestly higher, despite news that eurozone unemployment hit a new record high in October.

In other overseas news, the pace of economic growth in India slowed during the latest quarter. The country's GDP, the broadest measure of a nation's economic health, grew at a rate of 5.3%.

The dollar slipped against the euro, but was firmer against the British pound and Japanese yen. In the commodities market, oil prices edged higher, while gold headed lower.

Bond prices held steady, with the yield on the 10-year U.S. Treasury note edged up to 1.62%.

First Published: November 30, 2012: 9:47 AM ET

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Costco special dividend to beat fiscal cliff

Costco will pay $3 billion in a special dividend next month.

NEW YORK (CNNMoney) -- Costco Wholesale, the warehouse merchant, announced Wednesday that it will pay a special $3 billion dividend before year's end, saving shareholders from a big bite should taxes rise due to the fiscal cliff.

The company said the $7-a-share payment is possible due to its strong balance sheet and its good access to capital. The payment will be in addition to the regular 27.5 cent a share dividend that will be paid on Nov. 30.

The special dividend will be paid Dec. 18 to shareholders of record on Dec. 10. That will allow investors to pay the lower 15% tax rate currently in effect on dividends. With taxes set to rise on Jan. 1 as part of the fiscal cliff, the rate paid on the dividend could more than double for many high income taxpayers.

Related: Companies speeding up dividend payments

Numerous companies, including Costco rival Wal-Mart Stores (WMT, Fortune 500), have moved dividend payments normally made in January into December. But in Wal-Mart's case, it was the regular dividend being moved, not a special dividend being added.

Shares of Costco (COST, Fortune 500) rose 4.7% in premarket trading on the news.

Related: Record Black Friday shopping

The company also announced strong sales for November and the just completed quarter, periods that included the Black Friday weekend that kicks off the holiday shopping period.

Sales at stores open at least a year, a closely watched retail measure known as same-store sales, rose 6% at its U.S. stores for both the four-week and the 12-week periods ended Nov. 25, when the effect of higher gas prices were excluded. Total sales rose 9% to $8.15 billion in the four weeks ending Nov 25.

The National Retail Federation estimates that total U.S. shopping during the four-day holiday weekend rose 13% from a year ago, to a record $59.1 billion.

First Published: November 28, 2012: 7:50 AM ET

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Fiscal cliff countdown: Automatic spending cuts

President Obama and Majority Leader John Boehner have to deal with sequestration as part of their fiscal cliff talks.

NEW YORK (CNNMoney) -- There's one part of the fiscal cliff that nearly everyone agrees on: avoiding the $1.2 trillion in automatic spending cuts scheduled to begin on Jan 2.

Nearly lost in the heated discussions over tax cuts and entitlement reform is so-called sequestration. Part of the Budget Control Act of 2011, the cuts are set to automatically take effect in 2013 if an alternative agreement is not reached.

The reductions, which will take place over a decade and are spread equally between defense and non-defense federal spending, were designed to be unpalatable to both parties.

The Office of Management and Budget released calculations in September showing there would be a 9.4% cut to discretionary defense spending, such as overseas operations and weapon systems.

Non-defense discretionary spending, which includes housing assistance and energy subsidies for low-income people, would drop by 8.2%.

And non-defense mandatory spending, including the U.S. Forest Service and social services block grants, would be cut 7.6%. Certain low-income programs, such as Medicaid and food stamps, are shielded.

If these cuts are enacted, it would hurt the economy, experts say. In fiscal 2013 alone, federal spending would fall an estimated $65 billion, according to the Congressional Budget Office. This could shave off two-thirds of the expected economic growth for the year and boost the unemployment rate by as much as 1.5 percentage points, according to Steve Fuller, director of the Center for Regional Analysis at George Mason University.

"I hear it's too stupid to allow to happen, but they [lawmakers] don't talk about how to resolve it," said Fuller.

Related: Time running out on debt ceiling

Because of the uncertainty surrounding the cuts, experts say it's unclear what will happen come Jan. 2. Some budget watchers say federal agencies may hold off enacting the cuts to give Congress time to agree on an alternate deficit reduction plan. But advocates are warning that the cuts could devastate education and housing assistance.

Some 18% of federal grant money that flows to states would be subject to cuts, said Anne Stauffer, project director at the Pew Center on the States, which recently issued a report on the impact of sequestration. The cuts could total $7.5 billion. Title 1 spending for low-income students and special education funding would be the hardest hit. And more than 200,000 children could be dropped from the Head Start program.

Most states, meanwhile, are closely monitoring events in Washington, but Virginia is one of the few who is taking action now. The governor there has asked all state agencies to submit plans outlining how they would reduce spending in their departments by 4%.

"At this time we are simply preparing for this possible, but still avoidable, outcome," he said in mid-November.

On the defense side, many federal contractors are already holding off on hiring and projects, waiting to see what Congress does, Fuller said. The spending reductions could cost 325,700 jobs, including 48,100 civilian Department of Defense employees. Suppliers and vendors that depend on military contractors could also shed 282,400 jobs.

"Neither Democrats nor Republicans think sequestration is a good idea," said Michael Linden, director for tax and budget policy at the Center for American Progress, a left-leaning group. "That bodes well for their doing something about it."

First Published: November 29, 2012: 5:26 AM ET

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Stocks inch higher as fiscal cliff worries remain

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NEW YORK (CNNMoney) -- U.S. stocks rose modestly Thursday, but closed below the day's highs as investors digested downbeat comments from House Speaker John Boehner on ongoing fiscal cliff negotiations.

The Dow Jones industrial average finished up 0.3%, while the S&P 500 added 0.4% and the Nasdaq gained 0.7%. All three indexes had been higher in the morning.

"No substantive progress has been made in the talks between the White House and the House over the last two weeks," Boehner said during a news conference. The Speaker said that despite claims that President Obama supports a balanced approach, Democrats "have yet to get serious about real spending cuts."

Oil prices also shaved some of their gains, but still finished the day up nearly 2% to close above $88 a barrel.

Lawmakers and the White House have been in talks for months to try and avoid the slew of year end tax increases and spending cuts known as the fiscal cliff .

Treasury Secretary Tim Geithner was on Capitol Hill Thursday for meetings with Congressional leaders Thursday, while President Obama had lunch with defeated Republican presidential nominee Mitt Romney.

While investors have been growing optimistic that lawmakers will come to an agreement to avoid the fiscal cliff before the end of the year, trading will likely be volatile until a final deal is reached.

Data showing an improving economy also provided a boost on Wall Street.

The government said U.S. gross domestic product grew at a 2.7% annual rate in the third quarter. Separately, weekly claims for unemployment benefits fell 23,000 to 393,000.

Pending home sales jumped 5.2% in October from a year earlier, according to the National Association of Realtors. Outside of a few spikes driven by the $8,000 home buyer's tax credit in 2009 and 2010, NAR said pending home sales are at the highest level since March 2007.

Related: Fear & Greed Index sitting in neutral

Investors also sifted through a batch of quarterly results. Grocery chain Kroger (KR, Fortune 500) shares rose sharply after the company posted better-than-expected results for the third quarter and also lifted its outlook for the year.

Shares of troubled bookseller Barnes & Noble (BKS, Fortune 500) sank 11% after the company posted a loss of 4 cents per share and a revenue decline of 0.4%.

Shares of Tiffany (TIF) tumbled 6% after the luxury retailer reported third-quarter earnings that missed estimates. The company cut its forecast for the full-year.

Many major retailers also reported same-store sales for November, and the results were mostly disappointing despite strong Thanksgiving weekend sales.

Kohl's (KSS, Fortune 500)sales at stores open at least a year sank 5.6%, sending the retailer's stock down 12%.

Same-store sales at Gap (GPS, Fortune 500) improved, but the increase was less than expected.

Macy's (M, Fortune 500) shares dropped as November same-store sales unexpectedly slipped, and shares of Target (TGT, Fortune 500) were under pressure after the retailer reported a 0.1% decline in sales.

Research in Motion (RIMM) got a big boost from a Goldman Sachs upgrade. The BlackBerry maker also announced updates to its so-called developer ecosystem as the company works to drum up enthusiasm for the BlackBerry 10.

In Asia, the exchanges gained, with the Nikkei adding 1.0% and Hong Kong's Hang Seng closing 1.1% higher.

China's marquee index, the Shanghai Composite, lagged its rivals and posted a fresh multi-year low. The index lost 0.5%, and remains well below the psychologically important 2,000 point mark.

Markets in Europe closed higher, rising between 0.8% and 1.5%.

Two European sentiment reports injected life into the ailing eurozone economy. The European Commission's reading on economic sentiment pushed higher in November, after two months of deceleration. And the EC's business climate indicator also edged higher.

Related: Why Italian bonds are rallying

Also in Europe, Italy's borrowing costs continued to fall as investors bet the European Central Bank will backstop the nation's massive bond market. Yields on Italian 10-year bonds fell to 4.47%, near the lowest levels since the euro crisis erupted in 2011, following two strong auctions.

Meanwhile, the dollar lost ground against the euro and the British pound, but strengthened against the Japanese yen.

Gold prices for December delivery also edged higher, rising 0.6% to settle at $1,727.20 an ounce.

The price on the 10-year Treasury rose slightly, and the yield held steady at 1.62% from late Wednesday.

First Published: November 29, 2012: 9:42 AM ET

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One fiscal cliff fix: Raise the gas tax

NEW YORK (CNNMoney) -- As lawmakers race to negotiate a deal to avoid the fiscal cliff, some experts say one tax increase should be on the table: a gas tax hike.

Currently at 18.4 cents a gallon, the federal gas tax is used primarily to build and repair roads, bridges and other transportation infrastructure. The tax raises about $32 billion a year.

But that's not enough. The government hands out about $50 billion a year to states and towns to help with road costs. The difference comes out of general funds or has to be borrowed. Meanwhile, the gas tax hasn't been raised since 1993.

"Establishing a sustainable resource base for transportation needs to be part of any grand bargain," said Emil Frankel, a former transportation expert in the George W. Bush administration and now director of transportation policy at the Bipartisan Policy Center. "In the short run, raising the gas tax is the best way to do that."

Raising the gas tax was one of the recommendations of the Simpson-Bowles debt reduction plan in 2010. The plan called for a 15 cent-a-gallon hike to the gas tax, a level that would basically cover the current shortfall in the transportation budget.

Others went further. In a 2010 letter to the commission Delaware's Democrat Senator Tom Carper and former Ohio Republican George Voinovich proposed a 25 cent-a-gallon hike in the gas tax, with the additional 10 cents a gallon going toward debt reduction. The pair estimated it would generate $83 billion over five years to chip away at the debt, and an additional $117 billion for road repairs.

Related: Fiscal cliff tax deal -- getting to $1 trillion

But not everyone is convinced a gas tax hike is the way to go.

The gas tax is politically unpopular, mostly because it's regressive -- meaning it hits the poor more than the rich. It's also regionally biased. Most big bridges and highways are near cities, yet those in rural areas would pay the same in taxes.

"The burden would fall on the great middle class, not on the millionaires and billionaires," said Ken Orski, publisher of the infrastructure industry publication Innovation NewsBriefs, who himself supports an increase in tolls as a way to cover the funding shortfall. "That's why the White House is staunchly opposed to such an increase, and why there's virtually zero support in Congress."

That's one reason the tax hasn't increased in nearly 20 years, even as labor, steel and asphalt costs have risen sharply. Plus, as fuel efficiency increases, Americans can put more miles on roads while at the same time buying less gas, worsening the shortfall.

Other ways to plug the funding gap include instituting a mileage-based driving tax, shifting more of the burden to the states or taping private funding sources that would then charge the public user fees.

Calls to congressional staffers revealed little in the way of an effort to raise the tax at this time.

Still, as one Democrat staffer put it, with Republicans softening to the idea of raising taxes in general, "possibilities for this sort of talk has at least opened a bit."

First Published: November 28, 2012: 10:11 AM ET

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Obama presses 'fiscal cliff' case

27 November 2012 Last updated at 19:21 GMT Discussions on the fiscal cliff began with a meeting of congressional leaders at the White House US President Barack Obama is launching a week of public outreach in pressing his case for tax rises on the wealthy as the so-called fiscal cliff looms.

Mr Obama meets business leaders at the White House on Tuesday and members of middle-class families on Wednesday.

He wants Republicans to accept tax increases on the wealthy, while extending tax cuts for families earning $250,000 (£155,000) or less.

The fiscal cliff, a package of spending cuts and tax rises, hits on 1 January.

The measures, which would suck about $600bn out of the economy, were intentionally engineered as part of a 2011 compromise between Mr Obama and congressional Republicans.

Recession alert

Negotiators then hoped it would spur the two sides to reach a long-term solution to the US budget deficit.

Continue reading the main story

It is highly unlikely the Republicans will give the president what he wants. If they agree to "middle-class tax cuts", the fiscal cliff would still loom. It is true the drop off the edge would become a little shorter, and a little less painful, but it would still hurt a lot and they would have agreed to hand over a major bargaining chip without getting anything in return.

So this looks like the president playing at a fairly brutal long-term political game - continuing to paint the Republicans as caring only about the rich, unwilling to help ordinary Americans.

It is hard to see how this makes it any easier to get an agreement in the next few weeks. But it matters because if he or the Republicans do misjudge their brinkmanship, it won't be just them who tumble off the edge - they could take the rest of us with them.

A US failure to step back from the fiscal cliff could help plunge the world back into recession, the OECD, which represents the world's richest nations, warned on Tuesday.

As part of his outreach effort this week, Mr Obama is also scheduled to visit a local company in Pennsylvania on Friday.

With tax cuts passed under President George W Bush set to expire on 1 January, the White House says Mr Obama will not sign any deal which extends that measure for the wealthiest Americans.

John Boehner, the top Republican in Congress, has said he would consider increasing tax revenue by closing loopholes, though he remains opposed to raising taxes.

The House of Representatives Speaker has said such a strategy would hit small businesses and hold back economic growth.

Republicans instead want to see cuts to federal programmes that have strained the US budget, adding to the deficit because of the increasing number of participants and rising costs.

In recent days, however, several Republicans have shown willingness to countenance tax increases, including prominent Republican Senators Lindsey Graham, Bob Corker and Saxby Chambliss along with Representative Peter King.

Grover Norquist, a powerful anti-tax lobbyist, acknowledged on Monday that those Republicans were having "impure thoughts".

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Opinion: Ford stock not driving over fiscal cliff

Thelma and Louise plunged their Ford Thunderbird off a cliff. But Ford investors are confident that Alan Mulally can avoid a similar fate even though lawmakers in Washington have yet to reach a deal on taxes and spending cuts.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

Anyone who's seen "Thelma and Louise" knows that cars and cliffs don't tend to get along too well. But shares of Ford (F) are up nearly 15% since the broader market first started to slip in October on fears of the looming fiscal cliff.

Interestingly enough, Geena Davis and Susan Sarandon drove a baby blue Ford 1966 Thunderbird into the abyss at the end of the movie.

The fact that Ford has done well is a bit surprising. You'd think that worries about higher taxes and spending cuts would drive (sorry!) people away from the auto dealerships. Why make a huge purchase at a time when there is so much economic uncertainty? Throw in concerns about Europe's debt crisis and a slowdown in China and it's even more shocking that investors are favoring Ford right now.

Yet Ford isn't the only automaker whose stock has thrived while the S&P 500 has dipped. Shares of General Motors (GM), Toyota Motor (TM), Honda Motor (HMC) and even unprofitable electric car maker Tesla Motors (TSLA) are all up too.

Jim Kee, president of South Texas Money Management in San Antonio, said that it makes sense for auto stocks to be rallying. He pointed to statistics that show the average age of cars and trucks on the road in the U.S. is now at an all-time high of 11 years.

"We are just at the early stages of an upswing in auto sales. There is so much pent-up demand," said Kee, whose firm owns shares of Ford and GM.

But even though times may be looking good for all automakers, Ford's stock has been the best performer of the bunch. And that trend could continue.

Related: Ford posts $1.6 billion profit despite problems in Europe

For one, Ford's stock remains pretty cheap. The stock is trading at less than 8 times 2013 earnings estimates. That's a tad more expensive than GM, which is valued at about 7 times earnings forecasts. But Ford is a bargain compared to its Japanese rivals. Toyota and Honda both trade around 10 times profit projections for their next fiscal year.

Ford, which in case you forgot was the one member of Detroit's Big Three that didn't need a government-assisted bailout/bankruptcy, also has something that GM lacks: a dividend. Ford reinstated its quarterly payout earlier this year thanks to improvements on its balance sheet. Ford had gotten rid of its dividend in 2006. But its new dividend yields a decent 1.8%, which is higher than the rate on the 10-year U.S. Treasury note.

Kee said he likes Ford and GM equally. But for many investors, Ford appears to be the preferred choice because of the fact that it didn't have to go through Chapter 11. Kee conceded that the Treasury Department's stake in GM may be an overhang on the stock.

It makes sense. Used car salesmen may have a bad reputation. But politicians and bureaucrats in Washington, D.C., are probably hated even more. So, until GM can completely shed the Government Motors tag, Ford may continue to look more attractive than its bigger Detroit competitor.

But perhaps the best news about Ford in recent weeks is the fact that its well-respected CEO, Alan Mulally, isn't going anywhere for a few more years. There had been rumors that Mulally might soon retire, but earlier this month Ford announced he would remain CEO until "at least 2014."

Mulally is widely credited with keeping Ford away from bankruptcy. During his tenure, the company was prescient enough to borrow money before the credit markets froze in 2008. Ford has also boosted its market share during the past few years thanks to an emphasis on more fuel-efficient vehicles such as the Focus, Fusion and Fiesta.

"Ford has come up with some great products over the past few years and the fact that Mulally will still be around for a few years is a great sign. He has enhanced the value of the company. It's as simple as that," said Bob Bacarella, manager of the Monetta Fund in Wheaton, Ill. Bacarella said Ford is a long-time holding in the fund and he thinks the stock could double over the next few years.

Related: Ford's smooth CEO succession -- plus a few bumps

Ford also smartly followed the lead of companies like IBM (IBM) and Apple (AAPL) and formalized a clear succession plan for the firm. Ford promoted Mark Fields to the title of chief operating officer, paving the way for Fields to take over for Mulally once he does retire.

Contrast this seamless transition with the mess made by chipmaker Intel (INTC), which announced earlier this month that CEO Paul Otellini would be stepping down next May. Intel did not name a successor and left the door open for the company to hire an outsider as opposed to just promoting from within.

Of course, Ford could get hurt if the U.S. plunges over the fiscal cliff. But Ford appears to be on much more solid footing than its rivals -- and with Mulally still having his hands on the CEO steering wheel, investors are hoping Ford can avoid the disastrous fate that met Thelma and Louise's T-Bird.

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Stocks close lower on fiscal cliff concerns

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NEW YORK (CNNMoney) -- U.S. stocks closed lower Tuesday, as investors grew increasingly concerned about whether Congress can adequately and swiftly address the so-called fiscal cliff.

Senate Majority Leader Harry Reid said late in the day that members of Congress have made little progress in negotiating the terms necessary to avoid triggering a slew of year-end tax increases and spending cuts. Reid's comment sparked a late-day sell-off, after stocks spent most of the day bouncing around the breakeven line.

The S&P 500, the Dow Jones Industrial Average and the Nasdaq closed down between 0.3% and 0.7%, after bouncing around the breakeven line for most of the day.

"Investors are really facing up to the fact that there are only a few weeks left to get this done," said Frank Davis, head of trading at LEK Securities.

Investors largely ignored strong reports on housing and consumer confidence, as well as the latest news from Greece, where leaders struck a deal for the nation to avoid defaulting on its debt.

The S&P 500, the Dow Jones industrial average and the Nasdaq closed down between 0.2% and 0.6%, after bouncing around the breakeven line for most of the day.

Three reports painted a picture of a healthy U.S. economy. The Case-Shiller 20-city index showed that home prices jumped 3.6% in the third quarter, the biggest increase since the second quarter of 2010. Analysts had predicted a 3.1% increase.

The Conference Board released a better-than-expected reading on consumer confidence in November, a good sign ahead of the holiday shopping season. And while new orders for durable goods, including transportation, were flat in October excluding transportation, new orders rose 1.5%, according to a U.S. Census Bureau.

Related: Companies speeding up dividend payments

Still, Europe's woes continue to weigh on the United States. The Organization for Economic Cooperation and Development warned early Tuesday that Europe's worsening economy next year will slow U.S. growth more than previously forecast.

Late Monday, eurozone finance ministers and the International Monetary Fund reached an agreement that moves Greece closer to receiving a massive bailout payment. The deal includes lower interest rates for Greece, a debt buyback, and more time for the debt-laden country to repay its rescue loans.

European markets closed higher, with Britain's FTSE 100 up 0.2%, and Germany's DAX up 0.6%. France's CAC 40 was flat.

Asian markets ended mixed. The Shanghai Composite lost 1.3%. The Hang Seng in Hong Kong was 0.1% lower, and Japan's Nikkei rose 0.4%.

Fear & Greed Index

Companies: Packaged food maker ConAgra (CAG, Fortune 500) announced that it reached a deal to buy Ralcorp (RAH), the largest U.S. manufacturer of private label food, for $90 a share in cash -- a 28% premium from Monday's closing price.

Swedish telecommunications company Ericsson (ERIC) said it is suing South Korean electronics maker Samsung for patent infringement.

Shares of Facebook (FB) moved up 1% Tuesday after rising more than 8% Monday following the stock's upgrade by several analysts. Facebook has rallied nearly 50% since touching a low of $17.55 in early September. The stock, currently around $26, is trading at its highest level since late July.

Shares of Green Mountain Coffee Roasters (GMCR) soared more than 20% in after-hours trading after the K-cup maker reported a sharp jump in third-quarter revenue and profit.

Hewlett-Packard (HPQ, Fortune 500), still reeling from its $8.8 billion writedown tied to its $11 billion buyout of software firm Autonomy, dragged down the Dow, dropping more than 3%. HP is now facing lawsuits from investors related to the acquisition.

Currencies and commodities: The dollar gained against the euro and the Japanese yen but was flat against the British pound.

Oil for January delivery slipped 56 cents to $87.18 a barrel.

Gold futures for December delivery fell $7.30 to $1,742.30 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury moved higher, pushing the yield down to 1.64% from 1.66%.

First Published: November 27, 2012: 9:49 AM ET

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Fiscal cliff could hit holiday sales

NEW YORK (CNNMoney) -- Holiday spending got off to a strong start this weekend, but could looming tax hikes cause consumers to cut back on shopping?

The White House certainly thinks so.

President Obama's top economic advisers released a report early Monday, warning that if Congress doesn't prevent tax hikes on middle class families, consumer confidence could decline, retailers could be hurt and jobs may be cut.

"And as we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can't afford the threat of tax increases on middle-class families," the report said.

The report comes as the president and Congress remain at an impasse over the fiscal cliff, a set of tax increases and spending cuts set to begin in January.

President Obama is pushing to raise income taxes on the wealthiest 2% of Americans, while keeping the Bush tax cuts in place for those earning under $200,000 a year. The White House also wants to pass a patch to the Alternative Minimum Tax by the end of the year.

Without those two measures, the White House predicts consumers will cut their spending by nearly $200 billion in 2013 -- a worrisome sign given consumer spending accounts for more than two-thirds of the U.S. economy.

Related: What's in the fiscal cliff?

But if fears about these tax hikes are holding shoppers back, they certainly haven't shown it yet. Spending over the Thanksgiving weekend hit a new high of $59.1 billion, a 13% increase over last year, according to the National Retail Federation.

The NRF, along with CEOs of major retailers like Wal-Mart (WMT, Fortune 500), Costco (COST, Fortune 500), and Macy's (M, Fortune 500), are among the influential groups urging lawmakers to act now to avoid the fiscal cliff.

"Our customers are working hard to adapt to the 'new normal,' but their confidence is still very fragile," Wal-Mart CEO Mike Duke said in a statement after meeting with Obama two weeks ago. "They are shopping for Christmas now and they don't need uncertainty over a tax increase."

Even with uncertainty hanging over consumers, the NRF still predicts holiday sales will increase 4.1% this year.

So far, consumer sentiment, while strong, still seems shaky.

Consumer confidence, as measured by the Conference Board, rose to a four-year high in October, as job growth and rising home prices lifted spirits. Economists expect new data, released Tuesday morning, will show the index rose even further in November.

But other recent reports by the University of Michigan and Rasmussen Reports, both show consumer confidence fell slightly after the presidential election renewed some fiscal cliff fears.

"While consumers had anticipated a last minute settlement, some consumers are beginning to doubt whether that will happen before higher tax rates take effect at the start of the next year," said Richard Curtin, director of the University of Michigan survey. "While a successful resolution before year-end could reverse any declines, it would nonetheless diminish holiday spending."

Related: Black Friday shopping hits a new record

Other experts say most consumers are still largely unaware of how the fiscal cliff will hit their wallets, but it may become more of a reality if high-income households start cashing in on their investments in anticipation of higher capital gains taxes.

Consumer confidence is heavily influenced by the stock market, and a December sell-off could weigh on spending.

"Business and market confidence have already taken a blow and had an effect on the economy," said Diane Swonk, chief economist for Mesirow Financial. "The extent to which the cliff becomes a self-fulfilling prophecy is largely dependent on how much those two areas react and have spillover effects for the consumer."

Economists agree, even if President Obama gets what he wants on the Bush tax cuts and the AMT patch, consumer spending will still take a hit from the end of the payroll tax holiday in January.

Although it will raise taxes on most workers, neither party is talking about extending it right now. Effectively, someone making about $50,000 a year will pay another $1,000 in payroll taxes next year.

If consumers don't realize that now, they certainly will when they receive their first paychecks in 2013, said Ellen Zentner, senior U.S. economist for Nomura.

"The expiration of the payroll tax holiday will immediately affect personal income and spending in January, regardless of how it affects consumer confidence," she said. "All workers will see their take-home pay decline on Jan 1 and it's simple math -- that means that's less aggregate income and therefore less aggregate spending to start off the year."

First Published: November 26, 2012: 1:13 PM ET

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Stocks: Fiscal cliff keeps investors cautious

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NEW YORK (CNNMoney) -- U.S. stocks ended mixed Monday as investors kept one eye on the results of the start of the holiday shopping season, and the other on upcoming economic negotiations in Washington and Europe.

In the first full trading day since last Wednesday, the Dow Jones industrial average dropped 42 points, or 0.3%, and the S&P 500 slipped 0.2%. The Nasdaq composite managed to turn higher in afternoon training, rising 0.3%, buoyed by strength in tech shares.

eBay (EBAY, Fortune 500) shares rallied almost 5%, making it one of the best performers in the tech-heavy Nasdaq. The company said its PayPal unit enjoyed a 193% increase in mobile payment volume on Black Friday from a year earlier.

Apple (AAPL, Fortune 500) shares rose more than 3%. Facebook (FB) shares spiked after analysts upgraded the stock, and Yahoo (YHOO, Fortune 500) shares also rose after an upgrade from Goldman Sachs.

Fear & Greed Index

Investors were also looking again at the fiscal cliff. Congress is back in session, and lawmakers will be under pressure to reach a deal with the White House before the end of the year.

Following the first post-election meeting between the White House and congressional leaders almost two weeks ago, lawmakers seemed optimistic that they would strike a deal ahead of the New Year. But market experts are doubtful that a quick agreement can be reached.

"We were always skeptical and the weekend talk shows support our view that there has been little progress from initial positions," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "It is in the interest of both sides to take this to the wire, or a little more. Both sides have to make concessions and to do so before the last possible minute is understood as a sign of weakness to one's own base."

Meanwhile, European stocks closed in the red as eurozone finance ministers met for the third time to discuss the latest release of bailout funds for Greece. London's FTSE fell 0.6%, the CAC 40 in Paris slid 0.8%, and the German DAX slipped 0.2%

"There are no assurances that today's meeting will succeed where the previous two have failed," said Chandler.

If there is no final decision at the conclusion of the day's meeting, attention will turn to the next regular Eurogroup meeting scheduled for December 3.

Also in Europe, the Bank of England named Canadian central bank chief Mark Carney its next governor, taking the reins from outgoing Governor Mervyn King, which was a surprise move.

In another leadership change, Securities and Exchange Commission chairman Mary Schapiro announced she would be stepping down from her position, as expected, in mid-December. President Obama named Elisse Walter, who has been an SEC commissioner since 2008, as Schapiro's replacement.

Asian markets ended mixed. The Shanghai Composite lost 0.5% and the Hang Seng in Hong Kong slid 0.2%, while Japan's Nikkei added 0.2%.

Companies: Shares of Knight Capital (KCG) jumped on reports that the broker is weighing a sale. An August trading glitch at Knight cost the company more than $400 million.

Research in Motion (RIMM) shares gained ground, as investors are hopeful the BlackBerry 10, debuting Jan. 30, will signal a turnaround for the company. A bullish analyst report triggered a rally Friday, with the stock rising 14%.

Shares of McGraw-Hill (MHP, Fortune 500) rose after the company, which owns Standard and Poor's, announced that it is selling its education arm, McGraw-Hill Education, to private equity firm Apollo Global Management for $2.5 billion.

Currencies and commodities: The dollar gained on the euro and the British pound but lost ground versus the Japanese yen.

Oil for January delivery slipped 54 cents to settle at $87.74 a barrel.

Gold futures for December delivery lost $1.80 to settle at $1,749.60 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, pushing the yield down to 1.67% from 1.69% Friday.

First Published: November 26, 2012: 9:44 AM ET

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Obama, CEOs mend fences over fiscal cliff

Boeing's Jim McNerney was among 5 CEOs Obama called over the weekend about the fiscal cliff, which could give the White House and Big Biz an excuse to mend fences.

WASHINGTON (CNNMoney) -- Fiscal cliff negotiations are proving to be the perfect excuse for President Obama and the business community to smooth over a rocky four years.

The White House has struggled to make and keep friends in the business community, thanks to contentious policy fights over financial and health care reforms. Obama famously dubbed Wall Street as "fat cat bankers" and bashed health insurers for raising premiums and denying coverage.

The tension grew worse during the election when business groups doubled down their contributions to defeat Obama. The financial sector spent more $50 million supporting the President's opponent Mitt Romney, according to the Center for Responsive Politics.

Thanks to a new crisis at hand -- the fiscal cliff -- there are some signs that the ice may be breaking. It helps that the White House and leaders of big businesses are united in their desire to avoid the fiscal cliff -- the Jan. 1 expiration of the Bush tax cuts and the Jan. 2 across-the-board spending cuts -- which economists fear will lead to an economic maelstrom.

Related: Bernanke: 'Stakes are high' on fiscal cliff

Last week, the president reached out to several CEOs to shore up support for his position in averting the cliff, which includes tax hikes for the nation's wealthy. He invited 12 CEOs of large U.S. companies like General Electric (GE, Fortune 500), Xerox (XRX, Fortune 500) and Honeywell International (HON, Fortune 500) for talks at the White House last week. Over the weekend he called another five CEOs including Jamie Dimon of JPMorgan Chase (JPM, Fortune 500), according to CNN.

These talks could set the stage for a more congenial relationship in the next four years. Several business lobbying groups say they have not had a warm reception from the West Wing in the last four years.

Rob Nichols, president of the Financial Services Forum, a lobbying group for financial CEOs, said the fiscal cliff presents an "opportunity" for the business community and the White House to work together in a way that moves past the tension of the last four years.

The fiscal cliff has given CEOs plenty of opportunities lately to talk with top officials in the administration and Congress, said Matthew Miller, vice president at the Business Roundtable, which represents CEOs of big business.

"We're in the time of decision making... we have to fix the fiscal cliff. I think you're going to see a ramped-up engagement," Miller said.

Over the weekend, President Obama reached out to several CEOs that have been friendly toward his campaign, including Warren Buffett of Berkshire Hathaway (BRKA, Fortune 500), as well as Craig Jelinek of Costco (COST, Fortune 500), whose founder endorsed Obama in the campaign, Jim McNerney of Boeing (BA, Fortune 500), who chairs Obama's Export Council, and Tim Cook of Apple (AAPL, Fortune 500), whose employees contributed some $270,000 to Obama's re-election.

A White House official told CNN that all the meetings are key to "continuing conversations and outreach on the need to find a balanced deficit reduction solution that protects the middle class and continues to move our economy forward."

-- CNN's Jessica Yellin contributed to this report.

First Published: November 21, 2012: 10:37 AM ET

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