President Obama Defends Tax Cut - Stock Market Rallies - Bond Yields Rise

Treasury yields rose significantly and bond prices moved sharply lower Tuesday as the capital markets reacted to the compromise plan that will extend the current tax rates for another two years. The yield on the benchmark 10-year Treasury bond is presently at 3.15%, a level not seen since this summer.

President Barack Obama's news conference on Tuesday produced a staunch defense of his compromise with Capitol Hill Republicans to temporarily extend the about to expire tax cuts for all Americans. He said, "There are some who would have preferred a protracted political fight." He indicated that at this point in the recovery the American public was not interested in political infighting. While many Democrats in Congress are expressing unease with the agreement, Obama said that a political battle "would be a bad deal for the economy. And it would be a bad deal for the American people."

Dr. David Krause, AIM program director said, "President Obama said during the news conference that he will fight across the board tax cuts in 2012 when they expire again. He is acting very pragmatically at the moment and Wall Street likes the notion that the President will not be pushing as liberal an agenda as he did the first two years. Some in the media are calling it 'constructive gridlock.' The idea that the President and Republicans on Capitol Hill will have to compromise. The stock market was up significantly during the day in reaction to the agreement reached the previous night. And the bond market is indicating stronger growth in 2011."