NEW YORK -- The "fiscal cliff" took the stock market on a roller coaster Thursday. Small developments in the tense budget standoff yanked stocks back and forth throughout the day. In the end, U.S. stocks closed lower for the fourth day in a row.
The erratic performance underscored how the "fiscal cliff" can yank the market back and forth. The term refers to automatic tax increases and government spending cuts that will kick in next week if Republicans and Democrats can't reach a budget agreement by Monday night.
Stocks opened by hopping between small gains and losses, pulled up by news about fewer unemployment claims and down by the continuing lack of a budget deal in Washington.
Then, stocks turned decisively downward at mid-morning, unnerved by twin fetters: a report that consumer confidence fell to its lowest level since August, and a warning from the Senate majority leader, Democrat Harry Reid, that he feared the government would miss the Monday night deadline for working out a budget compromise.
A bright spot of economic news, an increase in sales of new homes, couldn't distract investors from worries about the budget impasse. Both Republicans and Democrats demanded that the other side take the initiative in compromising. The Dow Jones industrial average fell as much as 150 points, more than 1 percent.
Then, just as the Dow appeared headed toward a triple-digit loss, it whipsawed again, this time higher, after House leaders announced in the late afternoon that the chamber would meet Sunday evening to work on the budget.
At the close, stocks trimmed their losses but still closed lower. The Dow finished down 18.28 points to 13,096.31. The Standard & Poor's 500 index fell 1.73 to 1,418.10. The Nasdaq composite index lost 4.25 to 2,985.91.
To be sure, plenty of traders think the "fiscal cliff" is overhyped. Even if the government misses the Monday deadline, the higher taxes and lower government spending would take effect only gradually, and Congress could always repeal them.
Still, that doesn't mean they're not worried about the economy in general.
Trading volume was light, with many investors still on Christmas vacation. About 2.8 billion shares traded hands, compared to an average this year of about 3.6 billion. Light volume can make the market more volatile.businessnews