Cavuto Suggests Fear Of Tax Increases Caused Market Decline

Cavuto: Possibility Of Tax Hikes Are An “Immediate Concern To Some Investors” And Causing “Confusion” And “Worry” For The Markets. Despite first reporting that the market decline had “more to do with the slowing economy,” moments later Cavuto stated: "[T]he president is saying in the middle of all this that whatever is done on the debt situation, longer term tax hikes, revenue enhancements, whatever you want to call them, could and should be on the table. That was an immediate concern to some investors." From the August 2 edition of Fox News' Your World with Neil Cavuto:

CAVUTO: Alright, investors take a hike as they look at the debt and give it a hike.

[...]

Everyone breathing a sigh of relief we are told because this debt ceiling issue has been put to bed, and apparently we will go on, albeit with a couple of trillion dollars to go on. But that is close to what we seem to have lost in the market over the last eight trading days. Take a look at today. A huge swoon at the corner of Wall and Broad, owing more to do with the slowing economy that has always been a big concern of investors. The Dow down about 264 and a third points. One of the catalysts for this, well namely us. Consumer spending has been slowing markedly. In fact, in some regions of the country, consumers have just up and shut their wallets even as the government is trying to at least partially close its wallets. It doesn't appear to be working for consumers.

And finally the president is saying in the middle of all this that whatever is done on the debt situation, longer term tax hikes, revenue enhancements, whatever you want to call them, could and should be on the table. That was an immediate concern to some investors who said and thought: “wait a minute, didn't we get this resolved?” Apparently not. So some confusion, and for the markets and for folks getting out of town here, some worry. [Fox News, Your World with Neil Cavuto, 8/2/11]

Fox And Other Media Outlets Agree That Market Decline Was Due To “Weak Consumer Data”

Fox Business: “Sputtering Economy” Linked To “Weakening Consumption.” A FoxBusiness.com article reported: “Traders shrugged off a last-minute deal to avert an unprecedented default on American debt after heightened economic tension ignited an intense round of selling that sent the Dow plummeting for the eighth-straight day.” The article also stated:

A bout of disappointing economic data, including a steep downward revision to first-quarter economic expansion and an unexpectedly sharp decline in U.S. manufacturing, has led market participants to doubt the robustness of the economic recovery in recent sessions.

“The U.S. economy is very close to stall speed,” wrote Peter Fisher, head of fixed income at asset-management giant BlackRock. “With the weakness of the U.S. economy becoming increasingly apparent, consumption and investment decisions are rising to the forefront.”

Data released Tuesday showed personal spending fell for the first time in nearly two years in June. The gauge of consumption dipped 0.2% , according to the Commerce Department, shy of the 0.2% increase economists expected. Meanwhile, personal income grew at a pace of 0.1% for the month, slower than forecasts of 0.2%. On the whole, the report points to weakening consumption, which directly factors into broader economic growth measures.

“The dismal employment market and increasing prices are pushing Americans to save more and spend less,” wrote Chris Christopher, senior principal economist at IHS Global Insight.[FoxBusiness.com, 8/2/11]

WSJ: “Stock Slump” Is Related To Data Showing “Americans Cut Spending.” Like Fox Business, an article in The Wall Street Journal, another News Corp. property, reported:

Stocks slumped even as President Barack Obama signed into law a bill that raises the nation's debt ceiling and cuts the budget deficit by at least $2.1 trillion over the next decade. Markets are now focused on weak growth plaguing the U.S. economy.

Data Tuesday showed Americans cut spending by the most in nearly two years and saved at a faster rate during June, a pair of signs that underscored the economy's lack of vigor.

The consumer-spending figures highlight another aspect of the struggling recovery. Last week brought news that the U.S. economy barely expanded in the first half, and a report on Monday showed that manufacturing is shaky. Friday's employment report is expected to continue to show a stagnant labor market.

“All the debt-ceiling drama did was mask what's really happening in the economy,” said Rob Stein, global head of asset management at Astor Asset Management. “The ultimate outcome is slow growth for years and years.”[The Wall Street Journal, 8/2/11]

Bloomberg: “Stocks Tumbled...After An Unexpected Drop In Consumer Spending.” From an August 2 Bloomberg article:

Stocks tumbled as the Standard & Poor's 500 Index had its biggest one-day loss in a year and erased its 2011 gain, while Treasury yields fell to the lowest levels since November, after an unexpected drop in consumer spending added to concern the economy will slide into a recession. Gold and the Swiss franc rallied.

[...]

Investors sought the safety of Treasuries, gold and the Swiss currency even as President Barack Obama signed a plan to raise the federal debt limit before a possible default. Attention has shifted to weakening economic data, including today's 0.2 percent decrease in consumer spending, the slowest growth in personal incomes since November and an index of American manufacturing sinking to a two-year low.

“We have a stubbornly slow economy,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. “The economy is stuck in a very slow growth mode, which means that it's more susceptible to any external shocks.”[Bloomberg, 8/2/11]

Reuters: Stocks Fell Because “U.S. Consumer Spending Fell Unexpectedly” And “Incomes Barely Rose.” From an August 2 column by Edward Krudy on Reuters:

The S&P 500 turned negative for the year on Tuesday as the wrangling over the U.S. debt ceiling faded and investors turned their attention to the stalling economy.

The broad-based index fell for a seventh day and crashed through its key 200-day moving average in an ominous sign for markets. The seven days of losses mark the longest losing streak since October 2008.

[...]

Shortly after the Senate vote, Fitch Ratings said the agreement to raise the U.S. borrowing capacity means the risk of a sovereign default is “extremely low” and commensurate with a AAA rating. But it warned Washington must reduce its debt or face a downgrade.

A government report showed U.S. consumer spending fell unexpectedly in June for the first decline in nearly two years as incomes barely rose.[Reuters, 8/2/11]

NY Times: “World Markets Staggered By Weak Consumer Data.” From a New York Times article:

As the debt limit drama ended in Washington, storm clouds thickened in the financial markets.

The broader United States stock market dropped 2.6 percent, erasing all of its gains for the year. That capped a string of declines over seven consecutive days, its longest losing streak since October 2008.

[...]

European markets initiated the descent and the United States soon followed, despite Senate approval of an agreement to lift the debt ceiling and cut more than $2 trillion from federal spending.

The markets and the breaking of the budget impasse have been overwhelmed by bad economic news and the chances of more. On Tuesday, a report showed consumers cut spending the most in nearly two years. Attention turned to Friday's report on unemployment.

Market analysts and economists made clear that even though the debt limit agreement averted a potential default on United States debt, the drawn-out process had taken its toll.[The New York Times, 8/2/11]

Fox Regularly Dresses Up Political Preferences As Market Analysis

Fox Relentlessly Politicizes Swings In The Stock Market. Fox personalities repeatedly have claimed that increases in the stock market are due to the implementation of conservative political policies, and that decreases are due to progressive policies. They have also predicted market shifts based on who is elected to political office. [Media Matters, 8/4/10]

Other examples include:

• O'Reilly: “If It Looks Like A Republican Candidate Is Gaining Traction, The Market Will Go Up.” [Fox News, The O'Reilly Factor, 6/10/11, via Media Matters]

• Bolling Claims Extension Of Bush Tax Cuts “Directly” Correlates To Recent Stock Market Growth. [Fox News, Glenn Beck, 5/10/11, via Media Matters]
• Bolling Claims Stocks Declined Because Bush Tax Cuts For The Rich Might Not Be Extended. [Fox News, Bulls & Bears, 11/13/10, via Media Matters]
• Varney Declares Stock Market Rally “A Republican Rally.” [Fox News, Your World with Neil Cavuto, 10/8/10, via Media Matters]
• Fox Falsely Suggests Financial Reform To Blame For Market Drops. [Media Matters, 5/21/10]