NEW YORK (Reuters) – Investors may have been relieved there was a Washington debt deal but they weren’t impressed enough to celebrate on Monday — and that may not bode well for stock prices for the rest of the year.
Rather than a relief rally, U.S. stocks ended modestly lower on Monday as ugly economic data and some lingering concerns about whether the deal would get through Congress dominated trading. But even when the House of Representatives voted to pass the plan late in the day there was little reaction from U.S. stock index futures.
The deal agreed to by Republican and Democratic leaders will raise the government’s borrowing ceiling while cutting spending by at least $2.1 trillion over 10 years. All of the burden could fall on spending cuts with no guarantee of steps to lift tax revenues.
Rather than perceiving it as a meaningful effort at tackling the United States’ huge debt problem, investors worried about the impact of austerity on an economy already hit by souring business and consumer confidence.
Plans for such a significant fiscal retrenchment, even though most of the impact will be in the latter years of the program, come at a vulnerable time for the world economy.
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