Courtesy of Mish.
The SP&P staged a mild (and meaningless) 19-point flagpole rally on news of a possible compromise between House Speaker John Boehner and president Obama as shown by the following chart of S&P Futures.
Market participants hope that Obama and Boehner agree to kick the can down the road. Most likely they will, the question is by how much.
Please consider Obama Opens Fiscal Cliff Talks as Boehner Open to Revenue
House Speaker John Boehner said he offered a “framework” including new revenue to reduce the U.S. budget deficit in his first face-to-face talks today with President Barack Obama and top Congress leaders since the Nov. 6 election.
As both sides expressed optimism that a deal is possible, U.S. equity markets rose.
Boehner also said he is serious about including revenue in an agreement if accompanied by significant spending cuts. The framework is “consistent with the president’s call for a fair and balanced approach,” he said after what he called a “constructive” meeting with the president and other congressional leaders in the Roosevelt Room at the White House.
“We’re prepared to put revenue on the table, provided we fix the real problems,” including entitlement costs, said Senate Republican leader Mitch McConnell of Kentucky.
Despite the optimism, the starting points for both sides — Obama’s insistence on higher taxes for top earners and Republicans’ refusal to raise rates — leaves negotiators with arithmetically complex and politically fraught choices.
While insisting on taxes, Obama has shown some openness in recent days. He and Geithner said rates must increase without specifying that the top rate must return to the 39.6 percent level in effect when President Bill Clinton left office.
Democrats and some Republicans are also beginning to talk publicly about another alternative: a more modest increase in upper-income tax rates.
One idea would be to raise Obama’s $250,000 income threshold for a tax increase to $500,000 or $1 million and increase the current 35 percent top rate to 37 percent, Peter Orszag, Obama’s former director of the Office of Management and Budget, said today on Bloomberg Television….
