* Confidence wilts after failure of Boehner bill
* Banking shares slide; Citigroup and BofA shares drop
* Herbalife shares fall again, down for 8th straight day
* Dow off 1.1 pct, S&P; 500 down 1.1 pct, Nasdaq off 1.3 pct
By Gabriel Debenedetti
NEW YORK, Dec 21 (Reuters) – U.S. stocks slid on Friday
after a Republican plan to avoid the “fiscal cliff” failed to
gain support on Thursday night, shrinking hopes that a deal
would be reached before the new year.
Trading was volatile as investors lost confidence in the
prospect of a deal between the White House and Republicans.
Lower volume ahead of the Christmas and New Year’s holidays
exaggerated market swings. The CBOE Volatility Index or
VIX, the market’s favored anxiety measure, rose 5 percent to
18.56, but was off the day’s high.
Republican House Speaker John Boehner failed to garner
enough votes even from his own party to pass his “Plan B” tax
bill late on Thursday. This was the latest setback in
negotiations to avoid $600 billion in tax hikes and spending
cuts that some say could tip the U.S. economy into recession.
“The failure with Plan B was disappointing, if not terribly
surprising, but now there’s a real lack of clarity about what
will happen, and markets hate that,” said Mike Hennessy,
managing director of investments for Morgan Creek in Chapel
Hill, North Carolina.
The day’s biggest loser on the New York Stock Exchange was
Herbalife, which dropped for an eighth straight session.
Investor Bill Ackman recently ramped up his campaign against the
company. Herbalife skidded 19 percent to $27.25 and has lost
more than 35 percent this week.
Plan B, which called for tax increases on those who earn $1
million or more a year, was not going to pass the Democratic-led
Senate or win acceptance from the White House anyway. But it
exposed the reality that it will be difficult to get Republican
support for the more expansive tax increases that President
Barack Obama has urged.
Still, the declines of about 1 percent in the three major
U.S. stock indexes suggest that investors do not believe the
economy will be unduly damaged by the absence of a deal, said
Mark Lehmann, president of JMP Securities, in San Francisco.
“You could have easily woken up today and seen the market
down 300 or 400 points, and everyone would have said, ‘That’s
telling you this is really dire,'” Lehmann said.
“I think if you get into mid-January and (the talks) keep
going like this, you get worried, but I don’t think we’re going
to get there.”
Banking shares, which outperform in times of economic
expansion and have led the market on signs of progress with
resolving the fiscal impasse, led declines. Citigroup Inc
fell 2 percent to $39.35, while Bank of America slid 2.3
percent to $11.25. The KBW Banks index lost 1.4 percent.
The Dow Jones industrial average dropped 142.29
points, or 1.07 percent, to 13,169.43. The Standard & Poor’s 500
Index dropped 15.69 points, or 1.09 percent, to 1,428.00.
The Nasdaq Composite Index dropped 39.23 points, or 1.29
percent, to 3,011.15.
Even with the day’s declines, the S&P; 500 is up nearly 1
percent for the week and about 13 percent for the year.
The day’s round of data indicated the economy was
surprisingly resilient in November; consumer spending rose by
the most in three years and a gauge of business investment
jumped.
But separate data showed consumer sentiment slumped in
December. The S&P; Retail Index fell 1.4 percent.
U.S.-listed shares of Research in Motion sank 21
percent to $11.09 after the Canadian company, known as the
BlackBerry maker, reported its first-ever decline in its
subscriber numbers on Thursday alongside a new fee structure for
its high-margin services segment.
