U.S. stocks cut most losses; yen hits two-year low

Thu Dec 27, 2012 5:11pm EST
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By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks recovered from sharp losses to end only slightly lower on Thursday after the U.S. House of Representative said it would come back to work this weekend in a last-ditch effort to avoid the "fiscal cliff," while the yen hit a two-year low on expectations of bold monetary stimulus in Japan.

It was a fourth straight session of losses for U.S. stocks, while world stocks ended slightly higher.

Wall Street stocks tumbled in morning trade after Senate Majority Leader Harry Reid, the top Senate Democrat, said the United States may be poised to go off the "fiscal cliff." But in late trading, the House of Representatives said it set a work session for Sunday night ahead of the December 31 deadline for reaching a deal, paring losses that earlier that earlier had driven all three major stock indexes down about 1 percent.

Economists warn that the $600 billion in higher taxes and spending cuts set to kick in from January could push the world's largest economy into recession, dragging other countries with it.

"There's no conviction in the move or the overall market, based on the across-the-board reduction we've seen in volume ... but there will be continued weakness until there's sustained positive direction coming from our leaders," said Joseph Cangemi, managing director at ConvergEx Group, in New York.

The House of Representatives may stay in session until January 2, the final day of the current Congress, according to a Twitter message from House Majority Leader Eric Cantor.

That is the day that another component of the "fiscal cliff" - $109 billion in automatic spending cuts to military and domestic programs - is set to start.

The Dow Jones industrial average .DJI dipped 18.28 points, or 0.14 percent, to end at 13,096.31. The Standard & Poor's 500 Index .SPX was down 1.74 points, or 0.12 percent, at 1,418.09. The Nasdaq Composite Index .IXIC was down 4.25 points, or 0.14 percent, at 2,985.91.   Continued...

An employee of a foreign exchange trading company looks at monitors as a television set shows Japan's incoming Prime Minister and the leader of Liberal Democratic Party (LDP) Shinzo Abe speaking in Tokyo December 26, 2012. The yen fell to a 20-month low against the dollar on Wednesday, buoying the benchmark Nikkei stock average, as Japan ushers in a new prime minister eager to pursue drastic stimulus steps to drive the country's economy out of deflation. REUTERS/Yuriko Nakao