US STOCKS-Wall Street slides as fiscal deal unlikely before 2013

Fri Dec 21, 2012 1:42pm EST
 
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* Failure of Boehner's bill suggests compromise difficult

* Banking shares tumble; Citigroup and BofA shares drop

* Research In Motion shares slide more than 18 percent

* Indexes down: Dow 1.1 pct, S&P 500 1.2 pct, Nasdaq 1.3 pct

By Leah Schnurr

NEW YORK, Dec 21 (Reuters) - U.S. stocks tumbled more than 1 percent on Friday after a Republican proposal for averting the "fiscal cliff" failed to pass, diminishing hopes that a deal would be reached soon in Washington.

Trading was volatile as investors reckoned a fiscal agreement between the White House and Republicans before the end of the year was unlikely. Lower volume ahead of the Christmas and New Year holidays exaggerated market swings further, and the CBOE Volatility Index, or VIX, was up 6.5 percent.

Late on Thursday, Republican House Speaker John Boehner failed to muster enough votes from his party to pass a tax bill, dubbed "Plan B," to avert the so-called fiscal cliff, $600 billion of tax hikes and spending cuts due to start in January. If U.S. lawmakers don't agree soon on a budget that avoids the cliff, the U.S. economy could tip 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.   Continued...