S&P 500 Adds Facebook, and Budget News Sinks the Dow

Maybe investors should download the app that proves Santa is real -- because someone's got to start asking Santa for some better performances on Wall Street. The DowJones Industrial Average  dropped a coal-deserving 130 points Wednesday for its second straight loss just after Congress' fresh new budget deal. Here's why.

1. Congress looks to get two-year budget done
Merry Christmas, America: You get an operating government for two years. A bipartisan budget was proposed Tuesday that would keep the government running through to the end of 2015 without any shutdown hiccups or fiscal fits. The current short-term budget expires early next year, so members of Congress are rallying around this longer-term proposal like it was an air-tight pre-nup. 

The budget (or lack thereof) is what shut the government down for 16 days in October. The new deal will officially fund everything for two more years, which would be a big dose of calm to the PTSD-stricken markets. Since the federal government spends more than $3 trillion every year, it's wise to make sure it's running.

Instead of cheering, investors shrieked like a freshly after-shave-slapped Kevin McCallister on hearing the news. The government budget is no doubt good for the economy. But the risk of another budget crisis could have been the last reason for the Federal Reserve to continue its robust stimulus policy. Now that the risk is diminished, investors sold on expectations that the market-friendly quantitative easing will begin to taper as soon as this month.
2. Facebook gets "tagged" into the S&P 500
Now that's a friend request. Shares of Facebook  popped more than 4% in after-hours trading after a late Wednesday evening announcement that Mark Zuckerberg's baby was invited to join the S&P 500 stock index.
So what does that actually mean? Just that the 'Book is cool with 500 popular kids. The S&P 500 is an index that tracks the value of 500 large companies whose shares are listed on the New York Stock Exchange and Nasdaq. Just like the Dow's 30 big "blue-chip" companies, the S&P 500 index is used by investors as a broad barometer of how the market as a whole is doing. Plus, FB shares can expect higher interest from swaths of investors who lazily just buy into the S&P 500 index. 
The takeaway is that Wall Street has been expecting FB to get "the tap" for a while -- it's up more than 85% in 2013 (following its botched '12 IPO). While it took Google about the same amount of time to make the list, eBay and Yahoo! didn't join the S&P 500 until three years after their IPOs (and struggling J.C. Penney just got booted out of it like a B-list celeb). 

3. Discover Channel considers bid to snag Food Network ownerDon't change the channel, because the owner of HGTV and Food Network, Scripps Networks , popped 7.6% Wednesday for its biggest gain in two years on word that Discovery Communications  might try to purchase it. Hopefully the result will yield some kind of Cake Wars and Swamp People combined spin-off.

The takeaway is that there aren't any details yet about the price, but usually shareholders get a handsome premium when they get bought out by a bigger company -- 30% over the share price ain't a bad rule of thumb. There's been enough drama around cable industry mergers this month to earn a Bravo Real Housewives series -- Comcast and Charter Communications are both rumored to be stalking Time Warner Cable.
  • November's pre-holiday retail sales numbers
  • Weekly Jobless Claims

The article S&P 500 Adds Facebook, and Budget News Sinks the Dow originally appeared on Fool.com.

Fool contributors Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends eBay, Facebook, Google, Scripps Networks Interactive, and Yahoo! and owns shares of eBay, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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