NEW YORK — Wall Street is peering over the “fiscal cliff” and feeling vertigo.
The stock market finished one of the worst weeks of the year Friday, pushing Washington to work out a deal to avoid the tax increases and government spending cuts set to take effect Jan. 1.
Remarks by re-elected President Barack Obama and House Speaker John Boehner on the looming deadline didn’t do much to cheer the market. Stocks finished barely higher for the day.
Chris Bertelsen, the chief investment officer at Global Financial Private Capital of Sarasota, Fla., said he expects Congress and Obama to reach a compromise to avoid the fiscal cliff.
“But it could well be the conventional U.S. political way of doing it – the last-minute type of stuff – in which case the markets will be haunted by it until the point it happens,” he said.
As they head into talks with Obama next week on the fiscal cliff, congressional leaders no doubt remember what can happen on Wall Street when investors are worried and watching Washington’s every move.
In September 2008, at the depths of the financial crisis, the House defeated a $700 billion emergency rescue of the nation’s financial system, sending the Dow plunging 777 points.
The Dow also slid for eight straight days in the summer of 2011 as politicians squabbled over a deal to raise the nation’s federal borrowing limit before eventually reaching an accord Aug. 1.
The index slipped as much as 634 points between July 27, as the political bickering intensified, and Aug. 5, when S&P downgraded the national credit rating, citing the weakening of U.S. political institutions as a reason for the cut.
On Friday, stocks pared losses as investors took encouragement about the economy from a report by the University of Michigan showing that consumer confidence rose more than expected in November.
The dimming outlook for Europe also weighed on markets this week. The European Commission, the executive arm of the European Union, cut its forecast for economic growth in the region Wednesday.
Among stocks making big moves:
• Walt Disney fell $2.98, or 6 percent, to $47.06 after it said that advertising sales were flat at its ESPN unit, raising concern about the outlook for growth.
• Kayak Software surged $8.63, or 28 percent, to $39.67 after the company said it had agreed to be bought by rival travel website Priceline.com.