December 7th, 2010
08:34 PM ET

Extension of Bush-era tax cuts produces mixed results

A look at today's headlines in business news:

Stocks give up gains, end mixed
Stocks ended mixed Tuesday, giving back earlier gains, as investor optimism over the extension of Bush-era tax cuts gave way to speculation about a widening federal probe into insider trading and a spike in Treasury yields.

The Dow Jones industrial average fell 3 points, or less than 0.1%, to close at 11,359. The S&P 500 ended little changed at 1,224, after climbing to a  2-year high during active trading. The tech-heavy Nasdaq rose 3 points, or 0.1%, to 2,598.

Stocks held gains for most of the day as investors welcomed news that Obama had reached a deal with Republican lawmakers Monday that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months. It would also lower the payroll tax by two percentage points for a year.

But the momentum faded late in the day after Obama, who had wanted the cuts for high-earning taxpayers to expire, said in a press conference that he would push to have them eliminated after the two-year extension is over.

Treasury yields spike after tax deal 
Treasury prices moved sharply lower Tuesday as investors reacted to a compromise plan that will extend current tax rates for two years.

The sell-off pushed the yield on the benchmark 10-year note as high as 3.14%,  a level not seen since late July. Treasury prices and yields move in opposite directions. The 10-year yield moved above 3% for the first time in four months late last week.

Tuesday's decline came one day after President Obama announced a deal with Republican leaders that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months. It would also lower the payroll tax by two percentage points for a year.

While Treasury prices dropped, stocks rallied on the news. Investors have been focused on the tax cuts for weeks as lawmakers in Washington grappled with reaching a compromise during the notoriously unproductive lame duck legislative session.

The result? Investors are reveling in the clarity.

- contributors Charles Riley and Ben Rooney contributed to this report. 

Filed under: Economy • Taxes
soundoff (15 Responses)
  1. Cesar

    Thank you CNN. You are a great alternative to FOX Unfair and Unbalanced. I couldn't stomach more than 2 min. of Hannity. Wow! He has big news. Obama didn't keep his promise on taxes. Imagine that. A politician unable to keep his promise. Unheard of.

    December 7, 2010 at 9:31 pm | Report abuse |
    • DarthPoop

      All these talking heads whether they are far left or far right make my sphincter spasm. I've actually seen Hannity get confronted by a guest for his partisan stance on every issue and he simply said, "I understand that". These guys/gals know they can get a percentage of the 60% partisan voter segment to buy their books or whatever. Even Bill Maher admitted that if he gets 1% of progressives and atheists to see his movie or buy his book that he will be a multimillionaire. These people aren't stupid. You know someone is lying (or at the very least spinning) to you when they have a book to sell.

      December 7, 2010 at 11:05 pm | Report abuse |
  2. Dennis

    Cesar, I agree with your assessment of FOX. But I am totally against you pinning a label on the POTUS. Superficially it looks like he broke his promise, but his motivation is to prevent 7m people going hungry during Christmas and middle class taxes increasing next year.

    Perhaps you have the luxury of a roof over your head but I promise, the entire country is going to be thanking the POTUS next year. Scratch that – despite the benefits, we'll find more ways to discredit a man who's heart is in the right place.

    December 7, 2010 at 10:01 pm | Report abuse |
  3. Cesar

    @Dennis. Thank you so so much for your way of thinking. So sorry you didn't catch my sarcasm. I am glad Obama is for extending unemployment help. Too many heartless people don't feel that way. I am saying Hannity speaks as if he is so news worthy cause he criticizes Obama for not keeping his word on taxes. I say so what. He is not the only politician unable to keep a promise. Remember, "Read my lips..."

    December 7, 2010 at 10:13 pm | Report abuse |
  4. Protoman

    Why can't we just leave taxes where they are for everyone and work the federal budget within that? Why does taxes always have to be a political issue? The only tax I support lowering is the manufacturing tax which is ridiculously at 35% compared with socialist (sarcasm) Canada at 6%. I don't mind raising taxes on companies that outsource either, but not every person that makes $200k a year is Mr. Burns sucking the life force from the American worker. There are many good job creators who look out for the home team that get caught up in the class warfare political crossfire. Some common sense is needed on both sides.

    December 7, 2010 at 10:41 pm | Report abuse |
  5. MikeD

    We must stand up and fight. This comprise will not stand. The tax cut should be extended only for those under a low limit. say 250,000 of even 1 million but not unlimited. Obama must barrow some balls from Hillary. This is a time to stand tall. The republicans will cave when the wrath of the nation is against them. And it is only a few Republicans. Once you break the starngle holkd that those leader have in the party the others will flow. NO NO NO NO on this compromise.

    December 7, 2010 at 11:12 pm | Report abuse |
    • Jules

      English Muvahfuggah do you speak it?

      December 7, 2010 at 11:14 pm | Report abuse |
  6. Cesar

    @Jules. Yes, all my life. It is my primary language.

    December 7, 2010 at 11:25 pm | Report abuse |

    i think it is stupid to raise the tax rate for the more money you make..why cant it just be a flat rate..

    December 7, 2010 at 11:33 pm | Report abuse |
  8. Trent

    Don't call a roof over my head a luxery. I was laid off a good job went broke fast. I put on my best clothes, took my briefcase and resume and walked into a local Restaurant and told them I was applying for "Pot Washer" position, or busboy. The Chef looked at me and said "Why"? I said I was just laid off, I'm a hard worker, and I'm hungry. He hired me on the spot as a sandwich maker at minimum wage. It was hard on my ego at first, but I had the satisfation of pulling my own weight without welfare. If someone really wants a job, they can find one, Maybe shoveling calve liver in a meatpacking plant, but it keeps a tiny roof over your head and some food in your belly. Life doesn't even owe us that, but it can be had if you look and try and work.

    December 8, 2010 at 2:49 am | Report abuse |
  9. really?

    Obama has just secured his position as a one-time president.

    December 8, 2010 at 6:35 am | Report abuse |
  10. mjwilstein

    When Stephen Colbert holds an ironic celebration for Obama extending Bush's tax cuts, you know that this "compromise" was misguided:

    December 8, 2010 at 11:03 am | Report abuse |
  11. Richard in Texas

    Flat tax or national sales tax. Anything but the tax system we have now

    December 8, 2010 at 11:15 am | Report abuse |
    • Antoni

      It is really anazimg to me how many people file fraudulent returns. I worked in a tax office for almost 10 years and saw pepole do it everyday. I would be too scared to even try it-I would be the one to get caught.

      April 24, 2012 at 1:34 am | Report abuse |
  12. Cesar

    @Ruffnut. I agree, a progressive tax we don't need. Why punish people cause they earn more? I suppose Uncle Sam doesn't want a flat tax, then it cannot manipulate segments of the economy like tax breaks if you use solar energy, or tax breaks if people give to charity, etc.

    December 8, 2010 at 12:42 pm | Report abuse |