Wednesday Afternoon Cheat Sheet: 3 Stories That Moved Markets
The markets were mixed today on Wall Street. Investors spent the day digesting the State of the Union address and several economic initiatives that President Barack Obama laid out for 2013 and beyond.
At the close: DJIA: -0.26%, S&P 500: +0.04%, NASDAQ: +0.33%.
1) Obama called for a 24 percent increase in the federal minimum wage to $9.00 per hour in his State of the Union address on Tuesday night. The decision would affect not just the 15 million Americans who work for minimum wage, but also companies like Wal-Mart (NYSE:WMT) and McDonald’s (NYSE:MCD), which employ a large percentage of those workers. Like most wage issues, the line between support and resistance is split between employers and employees.
There’s no doubt that higher wage costs would be a financial burden to employers, but the President was quick to dismiss these concerns. He argued that no American working full time should be forced to live in poverty, which is the situation many minimum-wage earners find themselves in. Obama also proposed that the minimum wage be indexed to inflation, to ensure that it remains a livable wage in the future. As it stands, adjusted for inflation, the purchasing power of minimum-wage workers has fallen 30 percent since 1968.
2) The minimum wage wasn’t the only economic issue that the President addressed in his State of the Union speech last night. As many business leaders, economists, and politicians had hoped, Obama offered a clear signal of support for a free-trade agreement between the United States and European Union.
“Trade that is fair and free across the Atlantic supports millions of good-paying American jobs,” said the president, playing up the positive domestic impact such an agreement could have. Economists have estimated that U.S. economic activity could increase as much as 0.4 percent through 2027 as a result of streamlined regulations and more equitable tariffs… (Read more.)
3) The Chicago Board Options Exchange Volatility Index, also known as the fear index, advanced 3.9 percent to 13.13, before settling just below 13 for the day. The index, which fell sharply at the beginning of the year, is a popular indicator of implied volatility in the S&P 500. It represents the expected movement of the market over the next 30 days, and is recorded on an annualized basis.
A VIX reading of 12.98, is close for the day, means that the S&P 500 is expected to move at an annual rate of 12.98 percent in either direction over the next 30 days.
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