Stocks Fall as Republican Leader Loses Control of His Party
NEW YORK ( TheStreet) -- Major U.S. stock averages fell Friday, dragged down by House Speaker John Boehner's failure to get Republicans to follow his back-up plan on the so-called fiscal cliff.
Boehner, undone by more extreme members of his party, canceled a Thursday night vote on his "Plan B" budget proposal because he didn't have enough votes to get the measure passed.
The top Republican in the House indicated at a news conference Friday that he was still open to continued negotiations with the White House, and wasn't ruling out bringing up a bill that could pass with a significant amount of Democratic votes. Meanwhile, he reiterated the difficulties of bridging the political divide, a sentiment that stuck with most investors.
"We had a number of our members who really just didn't want to be perceived as having raised taxes; that was the real issue," Boehner said.The news outweighed upbeat durable goods, and personal income and spending reports on Friday. The Dow Jones Industrial Average dropped 121 points, or 0.91%, to 13,191. The blue-chip index, which had suffered its biggest loss since Nov. 14 as it slumped to an intraday low of 13,122.53, began the session up more than 8% in 2012. It closed higher for the week, up 0.43%. Losers trumped winners on the Dow 28 to two. The most prominent decliners were Bank of America (BAC), Walt Disney (DIS), Caterpillar (CAT) and Exxon (XOM). American Express (AXP) and McDonald's (MCD) were the only blue chips that finished with gains on Friday. The S&P 500 fell 14 points, or 0.94%, to 1,430. Despite Friday's losses, the S&P tacked on 1.17% for the week. The Nasdaq shrank 29 points, or 0.96%, to 3,021. The tech-heavy index suffered its largest one-day drop since Nov. 7 at its intraday low of 2,995. It gained 1.67% on the week. All sectors in the broader index retreated, with the utilities sector holding up better than others. The biggest losers included technology, financials, consumer non-cylicals and energy. Decliners eclipsed advancers by a ratio of 2-to-1 on the New York Stock Exchange and the Nasdaq. At final check, volumes totaled 4.84 billion shares on the NYSE and 2.62 billion shares on the Nasdaq. At the open Friday, volumes swelled to more than 3.63 billion shares at the Big Board and 1.67 billion shares on the Nasdaq, with Friday being a "quadruple witching" options-expiration day. "Simply put, this is bad news for the speaker and bad news for any future cliff-averting deal," said Dan Greenhaus, chief global strategist at BTIG. "A bunch of people have asked, 'Now what?' Unfortunately, the simple answer is that nobody knows." Greenhaus said it seems the most likely option now is for President Barack Obama and Senate Majority Leader Harry Reid to construct a bill in the Senate. He said that while a bill in the Senate could pass, the question is whether it could get enough Democratic votes in the House to compensate for the defecting Republicans. It would need to be a "very" bipartisan bill, Greenhaus noted. "In any event, there's just no way, no way, it can be constructed in three days." Gareth Berry, a foreign-exchange strategist at UBS, said the headlines look worse than they actually are. "After all, the plan was doomed to begin with, given Democrats had already decided not to put it to a vote in the Senate, and Obama had already threatened to veto it if necessary." Berry also noted that "the nervous market reaction was justified to some degree, however, given it illustrates just how difficult it will be to reach a compromise solution before year-end." The Republicans' "Plan B" counteroffer had included some spending cuts with tax increases only for those making more than $1 million. At Bank of America, economists haven't changed their call expecting a deal to emerge at the last minute and much of the decisions to be delayed into the new year, with austerity of roughly 2% of gross domestic product, said Ethan Harris, co-head of global economics research at the firm. On the U.S. data front Friday, the Bureau of Economic Analysis reported personal income growth of 0.6% in November after an increase of 0.1% in October. Personal spending rose 0.4% after falling 0.1% in October. Economists, on average, were expecting personal income growth of 0.3% and personal spending to rise by 0.3%. The Census Bureau reported that durable goods orders rose 0.7% in November after increasing 1.1% in October, and that, excluding the transportation component, durable goods orders ticked up by 1.6% after rising 1.9% in October. Expectations were for a durable goods order rise of 0.2% and a decline of 0.2% excluding the transportation component. "Taken together, November's personal income
>To contact the writer of this article, click here: Andrea Tse. Follow @Commodity_Bull
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts