Markets Liking Bigger Stimulus Tax Cuts

Markets are off their lows on discussion about the fiscal stimulus bill. The stimulus bill will be heavier on tax cuts than expected.

Traders are happy that the package is tilting more toward tax cuts, which the Street believes will bring the biggest bang for the buck (there is also support for infrastructure). The talk is of:

--individual tax credits
--writeoffs for company losses
--tax credits for hiring new people

The numbers are all over the place, but $400-$500 billion of an expected $850 billion program is likely. Poor economic numbers near-term are already anticipated by the market, but what about deeper 2009 cuts to estimates?

Those deeper cuts are not factored in, and we are seeing that today. Today's weak points in the Dow--JP Morgan,Verizon and AT&T--are due to downgrades from Bernstein (for AT&T and Verizon) and--for JP Morgan--lowered numbers for 2009 and 2010 from Mike Mayo at Deutsche Bank.

In the meantime, the economic news flow will be awful, particularly the December sales figures. Consider:

1) Vehicle sales for December (out today) will be awful: Goldman Sachs expects GM's to be down 42 percent, Ford down 31 pecent, Chrysler down 45 percent.

2) Retail comp store sales for December will be out Thursday; bookseller Borders reported this morning that sales during the holiday season fell 11.7 percent.

    • Obama Targets Tax Cuts of More than $300 Billion


Questions? Comments?