Stocks fell for a fifth day, the longest such streak since July, on concern that lawmakers in Washington would fail to reach a budget deal before a year-end deadline.
The New York Stock Exchange on Friday. Market indicators declined for the fifth consecutive day, the longest skid since July.
The Dow Jones industrial average dropped 158.20 points to 12,938.11, with losses accelerating in the last 20 minutes of trading as reports circulated that President Obama would not be making a new budget proposal in a meeting with Congressional leaders.
The Standard & Poor's 500-stock index fell 15.67 points to 1,402.43, its longest losing streak in three months, and the Nasdaq composite index fell 25.59 points to 2,960.31.
"The reality, late in the day, is that a deal is just not going to get done," said Ryan Detrick, a senior technical strategist at Schaeffer's Investment Research. "We could be greeted by a big sell-off at the start of January."
President Obama returned from a Christmas break in Hawaii to meet with Congressional leaders at the White House in the hopes of preventing across-the-board tax increases and government spending cuts beginning Jan. 1. Economists have said that if those measures are put in place, it could push the economy back into recession.
Traders have been focusing on Washington and the budget negotiations since the Nov. 6 elections returned a divided government to power. Stocks closed lower Thursday but erased most of an early loss after Republicans said they would reconvene the House of Representatives on Sunday.
"I can't wait till this is done, so we can start talking about markets again and not just about politics," said Doug Cote, chief market strategist at ING Investment Management.
Mr. Cote said that he expected that lawmakers would not reach a deal before the deadline and that when people assessed the extent of tax increases on the way, "the market is going to reel." Mr. Cote also expected slowing earnings growth to drag down stocks.
Despite the fiscal gridlock in Washington, major stock indexes are holding on to gains for the year. The Dow is up 5.9 percent, the S. & P. 500 is 11.5 percent higher, and the Nasdaq is up 13.6 percent.
Stocks rose in 2012 on optimism that a recovery in the housing market, coupled with an improving job market, would support economic growth. The Federal Reserve had also extended its bond-buying program, which is intended to lower borrowing costs and encourage spending and investment.
While stocks declined on Friday, reports suggested the outlook for the economy was improving.
A measure of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years, the latest sign of improvement in the once-battered housing market. The National Association of Realtors said Friday that its seasonally adjusted pending home sales index rose to its highest reading since April 2010.
The Institute for Supply Management's Chicago-area purchasing managers index for December came in at 51.6, beating estimates for a gain to 51.
Bond prices rose as investors moved money into defensive investments. The Treasury's benchmark 10-year note rose 9/32 to 99 10/32 and the yield fell to 1.70 percent from 1.73 percent late Thursday.
Stock in Hewlett-Packard, the computer and printer maker, fell 36 cents, or 2.6 percent, to $13.68 after the company said the Justice Department was investigating its software unit Autonomy. H.P. bought Autonomy for $10 billion in 2011 and has accused the company's former management of falsifying its accounting before the acquisition.
H.P. has lost almost half of its market value this year, making it the biggest decliner among the 30 stocks in the Dow average.
Barnes & Noble shares rose 62 cents, or 4.3 percent, to $14.97 after the British publishing and education company Pearson said it was making an $89.5 million investment in the company's Nook Media division.
Source: The New York Times | THE ASSOCIATED PRESS