By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell sharply on Friday,
denting weekly gains, after a Republican proposal to avert the
fiscal cliff did not find support, reducing hopes for a budget deal
before 2012 ends.
"If there is any policy maker that is not taking the fiscal
cliff seriously, he should check with the Congressional Budget
Office or check with any economist you can name, because it is very
serious and it will lead to a recession if we go off the cliff,"
said Hugh Johnson, chairman of Hugh Johnson Advisors LLC. "It's for
real."
The CBO forecasts a recession in the first half of next year
should the White House and Congress fail to reach a deal.
After falling as much as 189 points, the Dow Jones Industrial
Average (DJI) shed 120.88 points, or 0.9%, at 13,190.84, a level
that has it up 0.4% from the week-ago close.
All but two of the Dow's 30 components finished in the red, led
by Bank of America Corp. (BAC), down 2%.
Tallying a 1.2% weekly gain, the S&P 500 Index (SPX) lost
13.54 points, or 0.9%, at 1,430.15, with consumer shares hardest
hit among its 10 major sectors.
The Nasdaq Composite Index (RIXF) retreated 29.38 points, or 1%,
at 3,021, leaving it up 1.7% on the week.
For every share rising, more than three fell on the New York
Stock Exchange, where nearly 1.9 billion shares traded.
Composite volume topped 4.8 billion.
Shares of Research In Motion Ltd. (RIMM) fell almost 23% a day
after the company's fiscal-third-quarter results, which beat
estimates, but left investors fretting about changes to its
high-margin services business and costs tied to the approaching
launch of its new BlackBerry platform.
Friday's economic data was positive, especially a 0.7% November
rise in orders for durable goods, according to Johnson.
Still, investors would bypass the report, because the "focus is
so overwhelmingly on Washington," he said.
Those fiscal-cliff concerns found their way into a gauge of
consumer sentiment, which fell in December. The University of
Michigan-Thomson Reuters consumer-sentiment index declined to a
final December reading of 72.9, the lowest level since January.
House Speaker John Boehner on Friday said House members, the
Senate and President Barack Obama must continue work to avert the
looming fiscal cliff of tax increases and spending cuts.
The Ohio Republican spoke a day after he dropped a proposal to
allow higher taxes on yearly income of $1 million and up, because
he did not have enough votes to pass it, with the House then going
into recess. There are plans to return Dec. 27 in the event there
is some sort of deal to consider.
"It's hard to imagine that we could have policy makers in
elected office that are such ideologues in this day and age. But we
do have them and shame on them," commented Johnson.
The president and some legislators understand the importance of
not going over the fiscal cliff, so "there's a chance we forge an
agreement in the Senate which will pass the House, not with the
hardened Republican caucus, but with a consortium of Democrats and
Republicans," he added.
President Obama was expected to give a fiscal-cliff statement at
5 p.m. Eastern time.
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