Stocks fell in light trading Monday during a shortened holiday trading session with lawmakers running out of time to reach a budget deal that would prevent the U.S. from going over the so-called fiscal cliff.
The Dow Jones industrial average fell 52 points to 13,139.08. The Standard & Poor's 500 index gave up 3 points to 1,426.66 The Nasdaq composite slipped 8.4 points to 3,012.60.
In more than a dozen interviews with The Associated Press, conservative activists said they would rather see the country fall off the cliff than agree to any tax increases for any Americans, no matter how wealthy.
With many in Washington away for the holidays, that scenario appears increasingly likely.
"There is starting to become a little bit of an acceptance that we fall off the fiscal cliff," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "People are starting to think about how they may plan their portfolio if that does happen."
Stocks fell sharply Friday, with the Dow logging its biggest drop in more than a month, after House Republicans called off a vote on tax rates. That left federal budget talks in disarray just days before sweeping tax increases and government spending cuts are scheduled to take effect.
Sen. Joe Lieberman said Sunday that "it's the first time that I feel it's more likely we'll go over the cliff than not," following the collapse late Thursday of House Speaker John Boehner's plan to allow tax rates to rise on million-dollar-plus incomes. Wyoming Sen. Jon Barrasso, a member of the Republican leadership, predicted the new year would come without an agreement.
Failure to agree on a budget plan before year-end would lead to simultaneous spending cuts and tax hikes that many fear may push the economy back into recession.
President Barack Obama and Congress are on a short holiday break. Congress is expected to be back at work Thursday and Obama will be back in the White House after a few days in Hawaii.
J.C. Penney Co.'s stock jumped after Oppenheimer analysts reiterated a "Buy" rating on the company Monday, saying that traffic in stores in the final weekend before Christmas was strong. The analysts said that this made them more optimistic that the company's new approach to promotion will help it through the holidays and into 2013.
The stock gained 28 cents, or 1.4 percent, to $19.87.
Other retailers may struggle though this holiday season, as Christmas shoppers rein in their spending, their spirits dampened by concerns about the economy and the aftermath of shootings and storms. Marshal Cohen, chief research analyst at NPD Inc., a market research firm with a network of analysts at shopping centers nationwide, estimates customer traffic over the weekend was in line with the same time a year ago, but that shoppers are spending less.
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