* Failure of Boehner's bill suggests compromise difficult
* Banking shares tumble, Citigroup and BofA shares drop
* Research In Motion shares slide 17 percent
* Dow down 1.4 pct, S&P 500 off 1.5 pct, Nasdaq off 1.5 pct
By Leah Schnurr
NEW YORK, Dec 21 U.S stocks lost 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 is expected to be volatile as investors view a fiscal
agreement between the White House and Republicans before the end
of the year as increasingly unlikely. Lower volume heading into
next week's Christmas holiday could increase volatility. The
CBOE Volatility Index, or VIX, was up 10 percent.
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 so-called fiscal
cliff - $600 billion of tax hikes and spending cuts due to start
in January. The fear is that failure to come up with a solution
to avoid the cliff could tip the U.S. economy into recession.
Plan B had called for tax increases on those who earn $1
million or more a year, and the bill's failure suggested it
would be difficult to get Republican support for the more
expansive tax increases that Obama has urged, making it less
likely an agreement will be reached between the White House and
Republicans before the end of the year.
While Friday's slide reflected investors' anxiety, it was
not a large enough drop to suggest they believed a deal would be
reached too late to avoid damage to the economy, 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 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
Banking shares, which outperform in times of economic
expansion and have led the market on signs of progress with
resolving the fiscal impasse, were among the laggards. Citigroup
Inc sank 2.7 percent to $39.10, while Bank of America
slid 2.5 percent to $11.22. The KBW Banks index
lost 1.7 percent.
The Dow Jones industrial average dropped 185.38
points, or 1.39 percent, to 13,126.34. The Standard & Poor's 500
Index tumbled 20.88 points, or 1.45 percent, to 1,422.81.
The Nasdaq Composite Index lost 46.64 points, or 1.53
percent, to 3,003.74.
Even with the declines, the S&P 500 is up nearly 1 percent
for the week and about 13 percent for the year, though
uncertainty over the cliff may prompt many traders to lock in
gains as the year draws to a close.
The day's round of data indicated that the economy showed
surprising signs of resilience in November as consumer spending
rose by the most in three years and a gauge of business
But separate data showed consumer sentiment slumped in
December. The S&P Retail Index fell 1.5 percent.
U.S.-listed shares of Research in Motion sank 17
percent to $11.72 after the Canadian company, which makes the
BlackBerry, reported its first-ever decline in its subscriber
numbers late on Thursday.