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‘Fiscal cliff’: Will Wall Street light a fire under Congress?

So far at least, many on Wall Street seem to think that no matter what happens over the next few days with the fiscal cliff, Congress will still come through early in the new year.

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Trader Warren Meyers uses his handheld device as he works on the floor of the New York Stock Exchange Dec. 21. Though stocks were slightly down before Christmas, there has been no mass panic on Wall Street, even as the fiscal cliff looms closer.

Richard Drew/AP

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When it comes to the “fiscal cliff,” Wall Street has yet to hit the panic button – although some politicians might wish it would.

Rep. Peter Welch, a Democrat from Vermont, practically begged for a sharp sell-off on Wall Street to get Congress to make a deal.

“If we get pistol-whipped by the market, if it punishes us for our failure to act, it might be the only thing that gets us to act,” he told CNBC.

It wouldn’t be the first time a sell-off on Wall Street prompted Congress to do something. Back in October 2008, an initial failure by Congress to help the banking industry caused the Dow Jones Industrial Average to fall 30 percent, or about 3,000 points, in two weeks.

That hasn’t happened so far this time. Yes, in the past four trading sessions, the market has declined modestly. But since President Obama’s reelection, the Dow is off only about 130 points, or about 1 percent.

On Thursday, the Dow had a roller-coaster day, at one point falling nearly 140 points before recouping most of its losses when reports circulated the House would return on Sunday. At 4 p.m., the average was down only about 19 points.

What’s going on?

Wall Street’s shrug is partly related to its feeling that no matter what happens over the next few days, Congress will still come through early in the new year.

“It makes no difference whether it’s next week or on Jan. 4, when there is a new House of Representatives,” says David Kotok, chief investment officer at Cumberland Advisors in Vineland, N.J. “They will reach a deal because they have to reach a deal.”

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