A report detailing retail sales in December came in better than expected, and stocks moved higher today as a result. From November to December, retail sales rose 0.5%. It was the best showing since September. In contrast, sales rose 0.4% in November. Worries over the fiscal cliff did not stop shoppers from getting out and spending over the Christmas holidays.
The Dow Jones Industrial Average moved up 27.57 points to finish at at 13,534.89. The S&P 500 was up 1.66 points to 1,472.34. That marked a 5 year high for the S&P 500. The Nasdaq was down 6.72 points to 3,110.78. Apple’s slumping stock was one of the big culprits for the fall.
Though the fiscal cliff is behind us, the next controversy is quickly brewing. The US government is set to hit its debt ceiling by mid February, a bit earlier than was originally predicted. If the debt ceiling is not raised, the government will not be able to pay all of its obligations. At that point, it will have to pick and choose what it pays amongst things like Social Security, Medicare, interest on the debt, etc.
If the borrowing authority of the government is not extended soon, we could face another credit downgrade as well. Countries are given credit scores just as people are. It lets investors know how safe it is to buy bonds from said country. The US has always had a AAA credit score, which is the best one can achieve. In 2011, S&P (one of the big three companies that levy scores on nations) downgraded the US credit rating following the debt ceiling fiasco that unfolded that summer.
The debt ceiling was typically raised without much controversy in the past. After Republicans took over the House in the 2010 elections, they vowed not to raise the debt ceiling unless any hike was met with matching spending cuts. President Obama has said he will not negotiate over the debt ceiling again. The nation is locked in a game of chicken that could send shock waves throughout the world economy.