Deal stalled as Republicans vote on fiscal cliff plan

As a year-end deadline looms, Republicans in the House of Representatives pushed ahead on Thursday with their own “fiscal cliff” plan in a move that muddles negotiations with the White House to avoid steep tax increases and spending cuts.

The Republican-led House is aiming to vote on on Thursday evening on Speaker John Boehner’s “Plan B” to raise taxes only on annual incomes of more than $1 million — an effort to put pressure on US President Barack Obama to offer more concessions.

Stocks edged slightly lower as investors fretted that a deal wouldn’t come as soon as they had hoped after Obama threatened to veto the Republican plan.

 

The market barely reacted to a round of strong data, including on gross domestic product growth and housing, suggesting talks to avert the “fiscal cliff”, steep tax hikes and spending cuts due to take effect in 2013, remain the primary focus for markets.

“The closer we get to the end of the year without a deal, the more optimism is going to evaporate,” said Todd Schoenberger, managing partner at LandColt Capital in New York.

While investors have hoped for an agreement soon between policy makers over the fiscal cliff, this seems unlikely as wrangling continues over the details.

The US economy grew 3.1 per cent in the third quarter, faster than previously estimated, while the number of Americans filing claims for jobless benefits rose more than expected in the latest week.

On Thursday, the Dow Jones industrial average was down 18.74 points, or 0.14 per cent, at 13,233.23.

The Standard & Poor's 500 Index .SPX was down 0.84 points, or 0.06 percent, at 1,434.97. The Nasdaq Composite Index .IXIC was down 4.18 points, or 0.14 percent, at 3,040.18.

NYSE Euronext was the S&P 500's top percentage gainer, surging 35 per cent to $32.56 after IntercontinentalExchange Inc said it would buy the operator of the New York Stock Exchange for $8.2 billion. ICE shares rose 1.3 percent to $130.06.

Stocks rallied earlier in the week on signs of progress in the negotiations, led by banking and energy shares, which tend to outperform in times of economic expansion. On signs of complications, however, many have turned to hedging their bets through options and exchange-traded funds.

The U.S. economy grew 3.1 percent in the third quarter, faster than previously estimated, while the number of Americans filing new claims for jobless benefits rose more than expected in the latest week.

“It is great to see this kind of growth, but investors know it could all disappear if there's no deal on the cliff,” Schoenberger said. “Macro data may be on the back burner for a while.”

Existing home sales jumped 5.9 per cent in November, more than expected, and by the fastest monthly place in three years. And the Federal Reserve Bank of Philadelphia's December index of business conditions in the U.S. Mid-Atlantic region rose to 8.1 from -10.7 in November. Analysts were looking for a read of -3.