Fiscal cliff knocks US stocks; confidence dims

THE "fiscal cliff" took the stock market on a roller coaster Thursday. Small developments in the tense budget standoff yanked stocks back and forth throughout the day.

In the end, US stocks closed lower for the fourth day in a row, sending the unwelcome message that the budget standoff is still far from solved, the economy still far from healed.

The erratic performance underscored how the "fiscal cliff" can yank the market back and forth. The term refers to automatic tax increases and government spending cuts that will kick in next week if Republicans and Democrats can't reach a budget agreement by Monday night.

Stocks opened by hopping between small gains and losses, pulled up by news about fewer unemployment claims and down by the continuing lack of a budget deal in Washington.

Then, stocks turned decisively downward at mid-morning, unnerved by twin fetters: a report that consumer confidence fell to its lowest level since August, and a warning from the Senate Majority Leader, Democrat Harry Reid, that he feared the government would miss the Monday night deadline for working out a budget compromise.

A bright spot of economic news, an increase in sales of new homes, couldn't distract investors from worries about the budget impasse. Both Republicans and Democrats demanded that the other side take the initiative in compromising. The Dow Jones industrial average fell as much as 150 points, more than 1 percent.

Then, just as the Dow appeared headed toward a triple-digit loss, it whipsawed again, this time higher, after House leaders announced in the late afternoon that the chamber would meet Sunday evening to work on the budget.

At the close, stocks trimmed their losses but still closed lower. The Dow finished down 18.28 points to 13,096.31. The Standard & Poor's 500 index fell 1.73 to 1,418.10. The Nasdaq composite index lost 4.25 to 2,985.91.

Until recently, investors were treating the "fiscal cliff" with a measure of nonchalance. Stocks rose more or less steadily from mid-November until late last week.

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