* 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 20.9 pts, Nasdaq 43.25 pts
By Ryan Vlastelica
NEW YORK, Dec 21 U.S stock index futures dropped
more than 1 percent on Friday after a Republican proposal for
averting the "fiscal cliff" failed to pass, dissipating hopes
that a deal would be reached soon in Washington.
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, tax hikes
and spending cuts due to start in January that could tip the
economy into recession.
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.
"We had been moving in the right direction, but now we need
a different deal, and if this radical group of Republicans is so
intransigent that they won't do any deal, it will be very
difficult," said Wayne Kaufman, chief market analyst at John
Thomas Financial in New York.
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 20.9 points, or 1.5 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 43.25
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.
Orders for durable goods rose 0.7 percent in November, more
than expected, while personal income and spending were also
higher than forecast.
However, mirroring trading on Thursday, when strong economic
growth and home sales figures failed to excite investors who
were focused on the budget negotiations, futures didn't react to
The Thomson Reuters/University of Michigan's final December
consumer sentiment survey is due at 9:55 a.m., and is expected
to come in at 74.7, compared with a prior reading of 74.5.
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