U.S., World Markets Advance on Greek Vote

Nichole Harper
13 Feb, 2012
New York City

U.S. indexes traded higher on the first day after Greek lawmakers approved additional austerity measures and the euro advanced. Commodities and oil edged higher. Republican lawmakers gird for a fight the fiscal 2013 budget that cuts defense spending by only 1% and closes corporate loopholes.

[R]12:45 PM New York – U.S. indexes traded higher on the first day after Greek lawmakers approved additional austerity measures and the euro advanced. Commodities and oil edged higher. Republican lawmakers gird for a fight the fiscal 2013 budget that cuts defense spending by only 1% and closes corporate loopholes.[/R]

U.S. indexes traded higher and the euro advanced against the dollar after Greek Parliament passed deeply unpopular measures to avail the second bailout.

President Obama sent $3.8 trillion budget to U.S. Congress that will cut 1% budget of defense program and the Environmental Protection Agency by 2%, shift a slight increase in tax burden to wealthier individuals and increase spending for job training and highway construction and education.

Republican Representative Paul Ryan, chairman of the House Budget Committee said President Obama’s cut of 1% in defense as “hollows out” of the national security, the proposal to increase burden of tax on wealthy as “massive taxes on small businesses and families” and less than 5% cut in Medicare as “bureaucratic rationing.”

White House Budget Targets Cuts and Higher Taxes

President Barack Obama announced fiscal 2013 budget that includes incentives to create jobs, infrastructure spending and close tax loopholes for corporations and a higher tax on dividend income for the wealthiest tax payers.

The proposed budget of $3.8 trillion is the last budget annual budget of his term projects deficit below $1 trillion and estimates government spending to fall to sustainable level by 2017.

The current year budget is expected to generate deficit of $1.33 trillion or 8.5% of the economy compared to the September estimate of $956 billion.

The budget proposed by Obama estimated deficit to drop $901 billion or 5.5% of the gross domestic product compared to the previous estimate of $648 billion in September.

The proposed budget would raise taxes on dividends for those who earn more than $250,000 to 39.6% from the current 15% and impose a minimum tax for individual filers with annual income of at least $1 million.

White House budget plan includes higher Medicare premiums for wealthier recipients from 2017, impose $61 billion in higher fees on big financial institutions over ten years and terminate $41 billion of credits and deductions that subsidize oil and gas industries.

Euro Gains on Greek Austerity Vote

The euro gained against the dollar after Greece approved additional economic reforms but difficulties of implementing new measures trimmed the rise to 0.4% to $1.326.

Greek Parliament approved the labor and pension reforms demanded by international lenders after ten hours of debate on Sunday that forced lawmakers to make difficult choices.

The measures were approved with 199-to-74 vote that will assure euro zone finance ministers to release the second bailout of €130 billion. The approval was welcomed by euro zone leaders but implementation of the reforms may be another story.

The deeply unpopular measures are expected to trim spending that are as large as 7% of Greece’s gross domestic product, eliminate 150,000 government jobs and cut minimum wage by 22% in the private sector. In the current year alone, €3 billion government spending will be cut.

German ministers reacted with caution after the Greek approval on Sunday and lawmakers are scheduled to meet on February 27 in a special session to discuss Greek bailout.

Stock Movers

Chesapeake Energy Corp ((CHK)) rose 18 cents to $22.31 after the oil and gas explorer said it plans to raise $10 billion to $12 billion from asset monetization this year to fully fund its 2012 capital expenditures to cover cash needs, drilling expenses and debt reduction.

Diebold, Inc ((DBD)) increased 9% or $3.13 to $37.88 after the security system provider reported fourth quarter total revenue grew 7.5% to $850 million from $791 million in the same quarter last year.

Net income in the quarter swung to $79.8 million or $1.26 per diluted share compared to net loss of $120.0 million or $1.83 per diluted share in the year ago earlier.