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Tax Cut Extensions Raise Hopes for Bullish Future

20 December 2010 - Features - Editor

Weeks of speculation as to whether the possibility of extended tax cuts would become a reality were brought to a close on Friday with the signing by President Barack Obama of a tax law to the tune of $858 billion, shifting the focus to deciphering what exactly this means for US tax payers, masses of unemployed US citizens, and the path to economic recovery, among other issues. In a public show of solidarity for the welfare of the American people, the President was joined by both Republicans and Democrats at the signing, where he reportedly commented: "We are here with good news for the American people this holiday season. By a wide margin, both houses of Congress passed a package of tax relief that will protect the middle class, that will grow our economy and will create jobs for the American people."

In addition to introducing new tax relief measures, the bill extends existing Bush-era benefits (due to expire on December 31), with ongoing unemployment benefits being top of the list for the hundreds of thousands of Americans who have been unable to find employment. With consumer dollars being the driving force behind the economy, this is no doubt good news to investors as they wind down for the holiday season, with the general vibe being that 2011 is going to bring more of a bullish market. This has already been supported by stock market listed company Goldman Sachs, which has boosted its economic growth forecasts, along with its Standard & Poor's 500 targets in response to the tax-cut extension. It is very likely that more banks will follow their lead now that the plan has received the Presidential stamp of approval.

With the coming week cut short by Friday’s public holiday, Monday and Tuesday have no market moving data for Wall Street. Wednesday sees the release of the National Association of Realtors report on existing home sales, which is expected to have risen from October's 4.43 million to 4.68 million units for November. Also related to the housing market, is the FHFA Housing price index for October which is due on Wednesday morning. Thursday presents the latest data on personal income and expenditure as compiled by the Commerce Department, with economists predicting a 0.2 percent increase in income for November, with personal spending rising 0.4 percent. The Core PCE inflation-indicating component of the report is anticipated to have risen by 0.1 percent for the month of November. Weekly jobless claims from the Department of Labor are expected to have remained steady at 424,000 with continuing claims likely to have fallen from 4,135,000 to 4,075,000. Other reports due on Thursday include the Commerce Department’s durable goods orders; the University of Michigan's consumer sentiment reading for December; and new home sales index from the US Census Bureau.

 


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