Stocks sank, paring the weekly gain in the Standard & Poor’s 500 Index, after House Republican leaders canceled a vote on higher taxes for top earners and sent budget talks deeper into turmoil.
Micron Technology Inc. (Nasdaq: MU) slumped 6.9 percent after posting a wider first-quarter loss. Research In Motion Ltd. (Nasdaq: RIMM) tumbled 23 percent after the BlackBerry maker said it will overhaul service fees. Nike Inc. (NYSE: NKE) advanced 6.2 percent as the world’s largest sporting-goods company’s profit exceeded analysts’ projections.
The S&P 500 retreated 0.9 percent to 1,430.15 Friday, marking its biggest drop since Nov. 14. It has still advanced 14 percent this year, heading toward the biggest annual gain since 2009. The Dow slid 120.88 points, or 0.9 percent, to 13,190.84 Friday.
“With such a staunch group in the House, it looks as if the odds of going into 2013 without a deal have increased,” Kevin Caron, a Florham Park, N.J.-based market strategist at Stifel Nicolaus & Co., which oversees about $130 billion in assets, said by telephone. “I don’t know whether we’re going to reach a deal, when we’re going to reach a deal, if there’s going to be a deal. It’s just a complete wild card at this point.”
Trading in S&P 500 companies was about 52 percent higher than the 30-day average as all 10 industry groups fell. The index, which rallied earlier this week on signs budget talks were progressing, pared its weekly gain to 1.2 percent Friday. The Congressional Budget Office has said the U.S. may slip into a recession if lawmakers fail to pass a budget that averts more than $600 billion of automatic tax-and-spending changes scheduled to start in January.
Stocks rose Thursday as House Speaker John Boehner said he expects to keep working on a budget plan with President Barack Obama. Futures dropped later as Boehner scrapped a vote on a plan to allow higher tax rates on annual income above $1 million, yielding to anti-tax resistance within his own party.
House members and senators won’t vote on the end-of-year budget issues until after Christmas, giving them less than a week to reach agreement to avert the so-called fiscal cliff. Boehner called upon Obama and Senate Majority Leader Harry Reid to come up with legislation to avoid the fiscal cliff.
“We still have to think of a 2 percent fiscal drag on the economy in the first half of 2013,” Otto Waser, chief investment officer at Research & Asset Management AG in Zurich, said in a Bloomberg Television interview Friday. “That will inevitably mean a slowdown in the U.S. economy and probably some pressure on the markets. There is nothing certain at the moment.”
Reports Friday showed spending by U.S. consumers climbed in November as Americans pushed aside the threat of higher taxes next year, buying gifts for the holidays and making up for shopping lost to superstorm Sandy. Purchases rose 0.4 percent last month after a 0.1 percent drop in October, Commerce Department figures showed. The gain matched the median forecast of 80 economists surveyed by Bloomberg. Incomes rebounded after being depressed in October by lost wages due to Sandy.
A separate report showed demand for goods such as machinery and electronics climbed more than forecast in November. Orders for durable goods increased 0.7 percent last month after a 1.1 percent gain in October. The advance exceeded the median forecast of economists for a 0.3 percent rise.
Bank of America Corp. (NYSE: BAC), the second-largest U.S. bank by assets, declined 2 percent to $11.29. Citigroup Inc. (NYSE: C) dropped 1.7 percent to $39.49, while JPMorgan Chase & Co. (NYSE: JPM) lost 1.2 percent to $44.
Red Hat Inc. (NYSE: RHT) rose 4.5 percent to $54.99. The company reported third-quarter sales of $343.6 million in the period that ended Nov. 30, compared with the average analyst forecast of $338.1 million.
Ameristar Casinos Inc. (Nasdaq: ASCA) surged 20 percent to $26.50. Pinnacle Entertainment Inc. (NYSE: PNK) agreed to buy the company for $900 million, more than doubling in size to 17 casino resorts. Pinnacle jumped 21 percent to $16.20.
Risk perceptions for U.S. equities have risen to the highest level in four years compared with European stocks as the American economy faces a recession should lawmakers fail to reach a budget agreement.