Difficult Congressional and White House negotiations—expected to continue this weekend—have turned the long-looming fiscal-cliff issue into a nail-biter. Major tax increases and spending cuts, with the resulting drag on the economy, are set to take effect at the start of the new year unless the political negotiations yield an agreement. Worries about a post-"fiscal cliff" economy, if talks fail, have undermined consumer confidence, which plummeted in December, even as a report on new-home sales was upbeat. For the week ended December 28, the S&P 500 Index was down 1.9% to 1,402 (for a year-to-date total return—including price change plus dividends—of about 14%). The yield on the 10-year U.S. Treasury note was down 4 basis points to 1.73% (for a year-to-date decline of 16 basis points).
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