* Failure of Boehner's bill suggests compromise difficult
* Banking and energy shares could see biggest reaction
* Nike results beat expectations; RIM shares slump in US
* Futures drop: Dow 184 pts, S&P 19 pts, Nasdaq 36.5 pts
By Ryan Vlastelica
NEW YORK, Dec 21 U.S stock index futures were
sharply lower on Friday, dropping more than 1 percent, after a
Republican proposal for averting the "fiscal cliff" failed to
pass, further eroding hopes that a deal would be reached
Trading is expected to be volatile as investors view a
fiscal agreement between the White House and Republicans before
the year-end as increasingly unlikely. With trading thin ahead
of the holidays, market swings will probably be amplified. CBOE
VIX front-month futures, a measure of volatility, rose
Late on Thursday, Republican House Speaker John Boehner
conceded there were insufficient votes from his party to pass a
tax bill, dubbed "Plan B," to help avert the cliff, a
combination of tax hikes and spending cuts that could tip the
economy into recession if they take effect next year.
Boehner said he would hold a press conference at 10:00 a.m.
ET (1500 GMT), during which he is expected to discuss the vote.
Plan B had called for tax increases on those who earn $1
million a more a year, a far smaller slice of taxpayers than
President Barack Obama had asked for.
The bill's failure suggested it would be difficult to get
Republican support for the more expansive tax increases Obama
has urged, making it less likely an agreement will be reached
before the end of the year.
"This calls Boehner's leadership into question as well as
the government's ability to compromise on a deal. There's now
little chance anything will happen before the end of the year,"
said Robert Pavlik, chief market strategist at Banyan Partners
LLC in New York.
"This will lead to weakness throughout the day, and things
could get very bad with so many people out for the holidays."
Investors had previously considered such an outcome
unlikely. The decline implied by futures on Friday would wipe
out most of the week's equity gains, which buoyed the S&P 500
close to two-month highs.
Banking and energy shares, which outperform in times of
economic expansion and have led the market on signs of progress
with the fiscal impasse, could be the most vulnerable to any
setback. February crude futures dropped 1.3 percent in early
trading on Friday.
S&P 500 futures sank 19 points, or 1.3 percent, and
were below fair value, a formula that evaluates pricing by
taking into account interest rates, dividends and time to
expiration on the contract. Dow Jones industrial average futures
lost 184 points and Nasdaq 100 futures slid 36.5
The S&P 500 is up about 1.8 percent this week, boosted by
signs of progress in the fiscal negotiations between Obama and
Boehner earlier in the week.
So far in 2012, the index has gained 14.8 percent, though
uncertainty over the cliff may prompt many traders to lock in
gains as the year draws to a close.
November durable goods data is scheduled for release at 8:30
a.m. ET (1330 GMT), along with personal income and spending
data. The Thomson Reuters/University of Michigan's final
December consumer sentiment survey is due at 9:55 a.m.
Durable goods are seen rising 0.2 percent while the main
index in the consumer sentiment survey is seen at 74.7, compared
with a prior read of 74.5. Both income and spending are seen
rising 0.3 percent.
With budget worries at the forefront, investors are likely
to shrug off Friday's data, as they did on Thursday, when strong
economic growth and home sales figures failed to excite them.
"All other news will take a third-row seat to the
negotiations as investors deal with the game of 'chicken' being
played in Washington," Pavlik said.
Nike Inc rose 3.5 percent to $102.50 in premarket
trading, after reporting second-quarter earnings that handily
beat expectations Thursday on strong demand in North America.
Software distributor Red Hat Inc posted third-quarter
revenue that beat expectations.
U.S.-listed shares of Research in Motion slumped 14
percent to $12.20 in premarket trading. The company reported its
first-ever decline in its subscriber numbers Thursday and
outlined plans to transform the way it charges for its