The Dow Jones Industrials Average was in negative territory on Friday morning when congressional leaders emerged from their first fiscal cliff meeting at the White House. At that point the Dow was down 59 points.
But based on the totally innocuous and meaningless statements from the leaders that the meeting had been “constructive,” the Dow rallied significantly. Within an hour, the Dow rose by 104 points from its pre-statement low. It ended up almost 46 points for the day.
Here’s what ABC News reported was said by three of the congressional leaders who attended the meeting:
“I believe that we can do this and avert the fiscal cliff that’s in front of us today,” said (House Speaker John) Boehner.
(Senate Majority Leader Harry) Reid said he felt “very good” about the tenor of the talks. “We have a cornerstones of being able to work something out,” he said. “We’re both going to have to give up some of the things that we know are a problem.”
Both sides agreed to lay out “milestones of success so that confidence can build” among the American people, said (House Minority Leader Nancy) Pelosi. “I feel confident that a solution is in sight.”
How is it possible that statements that said nothing, almost certainly were drafted before the meeting began, and were noteworthy only for their polite tone rather than any indication of any substantive progress made such a positive impression on investors and convinced people to buy rather than sell?
Then again…this is the same investment community that rallies when the chairman of the Federal Reserve says in congressional testimony that the Fed is prepared to take steps the deal with the economy if they are needed…as if the Fed is ever not prepared to take steps.
Sounds like Henry Kissinger’s totally premature statement about the Vietnam peace negotiations that he was starting to see the light at the end of the tunnel. It made everyone feel better about the process even though the substantive progress at that point was very limited and extraordinarily ephemeral.