Congloms reliant on advertising were anxious over potential recession
Media stocks look set to rise Wednesday as the Senate and then, late Tuesday, the House of Representatives voted with bipartisan support for a package of new taxes and cost cuts to avert the fiscal cliff.
Media shares rose sharply Monday, the day the Senate approved a bill on which the House was voting on Tuesday night.
Media congloms were particularly sensitive to the negotiations since they’re vulnerable if advertisers contemplating a downturn in business consider cutting back, or if consumers fret about discretionary spending. Top media execs lobbied Congress to reach a deal fast, and the House voted on the Senate bill without amending it, as was first discussed.
By not reaching a deal by midnight on Dec. 31 Congress technically sent the nation over the cliff, which is a series of heftier across-the-board taxes and spending cuts that economists feared could push the still-fragile U.S. economy into recession. But as Tuesday was a holiday, the impact of the delay should be lessened since the House passed the deal before the complex effects hit Wall Street on Wednesday.
On Monday, when a deal seemed to be in sight, CBS was up $1.20, or 3.3%, to close at $38.05. News Corp. was up 90¢, or 3.7%, to $25.51 and Discovery rose $1.59, or 2.8%, to $63.48. Comcast, Scripps Networks, Time Warner, Time Warner Cable and other showbiz shares were also strong, outperforming the overall market.
The Senate voted 89 to 8 on Monday to raise taxes on household incomes above $450,000. Dividends and capital gains taxes for high-income households would rise to 23.8% from 15%. Unemployment benefits will be extended for a year.
“Happy New Year to all. May the coming 12 months bring you happiness, health and success … and a less dysfunctional Congress,” wrote Mohamed El-Erian CEO of giant bond fund Pimco in a blog on CNBC.