Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Market Optimism Falls Off a Cliff

Fiscal-cliff blues are taking their toll on stocks, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and the broader S&P 500 (SNPINDEX: ^GSPC  ) are down 0.9% and 1.1%, respectively, as of 10:10 a.m. EST.

Fiscal-cliff watch
Handicapping politicians is a thankless task. President Obama and House Speaker John Boehner had made substantial progress over the weekend and on Monday toward a legislative package that would avoid the fiscal cliff, fueling investor optimism and a mini-rally in stocks on Monday and Tuesday. I, for one, thought a pre-New-Year agreement was in sight. Unfortunately, Boehner went off on a tangent to try to pressure Obama -- a move that has now proven detrimental to negotiations and politically costly for Boehner himself.

President Obama needn't have worried about vetoing Boehner's "plan B," a pared-down plan to eliminate tax increases on all but the top earners; Republican congressman took care of the job for him. In an embarrassing setback, the Speaker was forced to announce there would no vote on plan B in the House, as he had been unable to secure the votes for it within his own party. This calls the entire negotiation process into question, as Boehner's leadership has been weakened.

As a result, investors' beginning-of-the-week optimism is fading. The effect on stock prices is obvious this morning.

The micro view
(NASDAQ: FB  ) has begun testing paid messages that will enable users to contact people they aren't connected with. It's no secret that the social-networking company is still trying to define its business model beyond banner ads, but this latest initiative suggests that it is somewhat out of touch with its users. Professional-networking site LinkedIn (NYSE: LNKD  ) already charges users for the same functionality, but the rationale for that is clear and accepted in the context of a job hunt. Facebook users aren't in "work mode" when they're using the social network, and selling the ability to contact them to strangers is unlikely to create much goodwill.

My Foolish colleague Evan Niu agrees that "there are some kinks in its business that [Facebook] needs to work out." However, he believes the company will be worth your investing dollars soon. Click here to receive his premium report, which includes updates to alert investors once he thinks the "buy" case is clear.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 21, 2012, at 11:06 AM, puffn1x wrote:

    We all knew that plan B would fail. So why the market drop?

    We all know its manipulation not news.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2166009, ~/Articles/ArticleHandler.aspx, 10/25/2016 6:43:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
FB $133.28 Up +1.21 +0.92%
Facebook CAPS Rating: ***
LNKD $189.85 Down -0.27 -0.14%
LinkedIn CAPS Rating: ***