* Senate leader doesn't see how deal can be done
* Consumer confidence hits four-month low
* Initial jobless claims near 4 1/2-year low
* Dow down 0.8 pct, S&P 500 off 0.9 pct, Nasdaq down 0.9 pct
By Edward Krudy
NEW YORK, Dec 27 U.S. stocks fell for a fourth
day in a row on Thursday and a measure of investor anxiety hit
its highest in five months after the top Senate Democrat warned
a deal to avoid fiscal austerity measures may not be reached by
the Dec. 31 deadline.
The comments by Senate Majority Leader Harry Reid just days
before the hefty tax hikes and spending cuts go into effect
pushed stocks down. The S&P 500 has lost 2.7 percent over the
past four days, its worst such run in over a month.
A four-day drop would also mark the S&P 500's longest losing
streak in three months as Wall Street wakes up to the
possibility that a deal may not be reached until next year.
The CBOE VIX volatility index, a measure of investor
fear, jumped above 20 for the first time since July, climbing
around 4 percent in another sign of growing concern. Investors
fear the so-called fiscal cliff could push the U.S. economy into
recession next year.
The VIX's "recent spike seems to suggest that market
participants are bracing for a rather significant uptick in
market volatility in early 2013," said Frederic Ruffy, options
strategist at WhatsTrading.com.
Stocks in the materials and the financial sectors, which are
more vulnerable to the economy's performance, took the brunt of
the selling. Shares in Bank of America fell 2 percent to
$11.29, while Freeport-McMoRan Copper & Gold fell 1.6
percent to $33.38.
Reid criticized Republicans for refusing to go along with
any tax increases as part of a compromise solution with
Democrats. Referring to the fiscal cliff, he said: "It looks
like where we're headed."
The Dow Jones industrial average was down 106.63
points, or 0.81 percent, at 13,007.96. The Standard & Poor's 500
Index was down 12.33 points, or 0.87 percent, at
1,407.50. The Nasdaq Composite Index was down 27.48
points, or 0.92 percent, at 2,962.68.
Frank Lesh, a futures analyst and broker at FuturePath
Trading in Chicago, said his clients have been delaying trading
due to uncertainty about the fiscal cliff, making the year-end
period quieter than usual.
"With the added drama in Washington, we have got even more
people sidelined," he said. "No one knows how this turns out or
how the markets are going to react to it."
President Barack Obama arrived back in Washington from
Hawaii to restart stalled negotiations with Congress. House
Speaker John Boehner and other Republican leaders were to hold a
conference call with Republican lawmakers. The expectation was
that lawmakers would be told to get back to Washington quickly
if the Senate passed a bill.
Treasury Secretary Timothy Geithner announced the first of a
series of measures that should push back the date when the U.S.
government will hit its legal borrowing authority - a limit
known as the debt ceiling - by about two months.
Economic data seemed to confirm worries about the impact of
the fiscal cliff on the economy.
The Conference Board, an industry group, said its index of
consumer attitudes in December fell to 65.1 as the budget crisis
dented growing optimism about the economy. The gauge fell more
than expected from 71.5 in November.
However, the job market continues to mend. Initial claims
for unemployment benefits dropped 12,000 to a seasonally
adjusted 350,000 last week and the four-week moving average fell
to the lowest since March 2008.
But recent signs that the economy is improving have taken a
back seat to the political uncertainty.
"The US equity market has not yet adequately responded to a
genuinely improving macro backdrop, and is probably held back by
uncertainties surrounding the resolution of the 'fiscal cliff',"
said Goldman Sachs in a research note.
Marvell Technology Group fell 4.2 percent to $7.09
after it said it would seek to overturn a jury's finding of
patent infringement. The stock had fallen more than 10 percent
in the previous session after a jury found the company infringed
patents held by Carnegie Mellon University and ordered the
chipmaker to pay $1.17 billion in damages.