Markets Stay Put as Politicians Play Economic Chicken

The markets today have contented themselves with staying grounded. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 18 points, or 0.14%.

The biggest factor weighing on the markets is the impending fiscal cliff, a series of tax hikes and spending cuts set to take effect in January in the absence of Congressional action. While virtually all economists predict that letting the economy tumble over the cliff would lead to a recession next year, lawmakers in Washington have nevertheless chosen to use the ongoing stalemate as an opportunity to "play tough" and pander to their political bases. Over the weekend, President Obama and House Speaker Boehner met behind closed doors to discuss the matter, though details of the meeting have yet to emerge.

Technology companies are among the day's best-performing stocks, with Cisco Systems (NASDAQ: CSCO  ) and Hewlett-Packard (NYSE: HPQ  ) leading the Dow higher. However, as my colleague Anders Byland noted this afternoon, "There's no unified surge of tech love behind [the] seemingly concerted move."

HP is rising on news that corporate raider Carl Icahn is accumulating a position in the ailing personal-computer manufacturer. Icahn's modus operandi is to acquire a large stake and then force target companies to either overhaul their operations, merge with a competitor, or sell off assets. He has recently staked activist claims in the Netflix (NASDAQ: NFLX  ) and Chesapeake Energy (NYSE: CHK  ) .

Cisco's performance follows a purportedly upbeat meeting with industry watchers at the end of last week. According to an analyst at Topeka Capital: "Cisco made a compelling case for how the company can fill a void in the [information technology] world, grow its recurring revenue stream, and continue to deliver profitable growth in the process. We believe the stock continues to represent an attractive value."

Among today's laggards, alternatively, are the two banking components of the Dow, JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) . Both of these stocks have had phenomenal years, up 27% and 90%, respectively. As a result, it wouldn't be overly surprising to see hedge funds and other investment managers start taking profit by the end of the year. Ultimately, however, their performance for the remainder of 2012 will likely be tied to the success or failure of negotiations over the fiscal cliff.

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