Most FOMC participants see QE3 buying end in 2013

Fiscal Cliff

The Fed’s December meeting took place while U.S. lawmakers and President Barack Obama were negotiating a budget plan to avoid the so-called fiscal cliff of scheduled tax increases and spending cuts. An agreement, which was passed and sent to the White House Jan. 1, delays spending cuts by two months and undoes income tax increases for more than 99 percent of households.

The accord lifted U.S. stocks yesterday to a three-month high, extending last year’s 13 percent rally in the Standard & Poor’s 500 Index that was the best annual gain since 2009. The benchmark gauge for American equities advanced 2.5 percent to 1,462.42 yesterday.

The yield on the 10-year Treasury note climbed 0.08 percentage point to 1.84 percent, up from a record low of 1.39 percent on July 24.

Shares maintained gains last year even as data reports gave mixed signals about prospects for the world’s largest economy. The recovery in housing prices hasn’t been substantial enough to cut the jobless rate.

Home Prices

Housing prices, which began to collapse in 2006 sparking the longest and deepest recession since the Great Depression, are rebounding and providing a boost to consumer’s balance sheets. The S&P/Case-Shiller index of home prices in 20 cities increased 4.3 percent from October 2011, the biggest 12-month advance since May 2010.

A rebound in auto sales is another bright spot. General Motors Co., Ford Motor Co. and Chrysler Group LLC posted December U.S. vehicle sales gains that exceeded analysts’ estimates, completing a year of surprising growth.

U.S. deliveries of cars and light trucks climbed 10 percent for Chrysler, 4.9 percent for GM and 1.6 percent for Ford, according to company statements. The automakers topped analysts’ average projections for gains of 7.6 percent by Chrysler, 2.1 percent by GM and 1.2 percent by Ford in a Bloomberg survey.

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