Wall Street slips as 'cliff' talks sour, but hopes remain

NEW YORK Thu Dec 20, 2012 2:02am IST

Traders work on the floor of the New York Stock Exchange, December 18, 2012. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, December 18, 2012.

Credit: Reuters/Brendan McDermid

Related Topics

Stocks

   

NEW YORK (Reuters) - U.S. stocks fell on Wednesday as talks to avert a fiscal crisis by the end of the year turned sour following recent progress, even as the market's moderate decline points to expectations that a deal will be reached.

President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could pull the U.S. economy back into recession.

House Speaker John Boehner said his chamber will pass a proposal that Obama had already threatened to veto as it spares many wealthy Americans from tax hikes needed to balance the budget. Obama has already agreed to reductions in benefits for senior citizens.

"My guess is they're close to a deal, and right before, it looks like the deal is about to blow up either on manufactured or legitimate reasons," said Uri Landesman, president of hedge fund Platinum Partners in New York.

He said if the market thought the deal was off, the S&P 500 would slide below 1,400. It stands now near 1,440, nor far from a two-month high.

The CBOE volatility index .VIX surged 10.2 percent to trade above 17, but has remained relatively stable. Its 14- 50- and 200-day averages are all within 1.2 points.

Landesman said the VIX's stability indicates "the bulls have control of this market still."

The Dow Jones industrial average .DJI fell 63.01 points, or 0.47 percent, to 13,287.95. The S&P 500 .SPX lost 7.77 points, or 0.59 percent, to 1,439.02. The Nasdaq Composite .IXIC dropped 4.97 points, or 0.16 percent, to 3,049.56.

General Motors (GM.N) bucked the overall weakness to surge 6.7 percent to $27.20 after the company said it will buy back 200 million of its shares from the U.S. Treasury, which plans to sell the rest of its GM stake over the next 15 months.

Banks and energy shares - groups that outperform during periods of economic expansion - have led recent gains, indicating a shift to focusing on a growing economy as Wall Street looks past the budget talks.

The S&P 500 added 2.3 percent over the past two sessions, the first time it has marked two straight days of 1 percent gains since late July.

Defensive sectors led the downside on Wednesday, with the S&P health care sector index down 0.9 percent.

Oracle ORCL.O shares helped cap losses in the Nasdaq after it reported earnings that beat expectations on strong software sales growth. Oracle jumped 3.7 percent to $34.09.

Knight Capital Group Inc (KCG.N) climbed 6 percent to $3.53 after it agreed to be bought by Getco Holdings in a deal valued at $1.4 billion. The stock, which nearly collapsed after a trading error in August, remains down about 70 percent so far this year.

Data showed homebuilding permits touched their highest level in nearly 4-1/2 years in November. The PHLX housing index fell 0.6 percent, but is up nearly 70 percent this year as the housing market has turned the corner.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

Coal Mining

Coal Mining

India to open coal to commercial mining firms soon, minister says  Full Article 

RBI Loan Rules

RBI Loan Rules

RBI relaxes overseas loan recast rules   Full Article 

E-commerce Firms

E-commerce Firms

Amazon, e-commerce rivals fuel commercial property boom in India  Full Article 

Growth Forecasts

Growth Forecasts

Indian economic growth forecasts pegged back, despite rate cuts: Reuters Poll.  Full Article 

Uber is Back

Uber is Back

Uber back in Delhi; govt says must await approval.  Full Article 

Markets at Record

Markets at Record

Sensex rises to record after ECB stimulus programme.  Full Article 

Pharma Sector

Pharma Sector

Ipca Labs hit by FDA ban on plant for standard violations.  Full Article | Related Story 

Forex Reserves

Forex Reserves

India FX reserves at record high as RBI fortifies defences  Full Article 

QE for Euro Zone

QE for Euro Zone

ECB launches 1 trillion euro rescue plan to revive euro economy.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage