* Confidence drops after failure of Boehner bill
* Herbalife shares skid, down for 8th straight day
* Banking shares slide; Citigroup and BofA shares sink
* Stocks fall: Dow 0.91 pct, S&P 500 0.94 pct, Nasdaq 0.96
By Gabriel Debenedetti
NEW YORK, Dec 21 U.S. stocks finished lower on
Friday after a Republican plan to avoid the "fiscal cliff"
failed to gain sufficient support on Thursday night, draining
hopes that a deal would be reached before 2013.
Still, stocks managed to rebound from the day's lows near
the end of the session, and for the week, major averages still
ended higher, with the S&P 500 gaining 1.2 percent.
Trading was volatile as confidence eroded in the prospect of
a deal out of Washington, and in part due to quarterly
expiration of options and futures contracts. The CBOE Volatility
Index or VIX, the market's favored anxiety measure,
finished below its high of the day.
Republican House Speaker John Boehner failed to garner
enough votes from even his own party to pass his "Plan B" tax
bill late on Thursday. It was the latest setback in negotiations
to avoid $600 billion in tax hikes and spending cuts that some
say could tip the U.S. economy into recession.
"The failure with Plan B was disappointing, if not terribly
surprising, but now there's a real lack of clarity about what
will happen, and markets hate that," said Mike Hennessy,
managing director of investments for Morgan Creek in Chapel
Hill, North Carolina.
Herbalife dropped for an eighth straight session.
Investor Bill Ackman recently ramped up his campaign against the
company. The company skidded 19 percent to $27.27 and has lost
more than 35 percent this week.
Plan B, which called for tax increases on those who earn $1
million or more a year, was not going to pass the Democratic-led
Senate or win acceptance from the White House anyway. But it
exposed the reality that it will be difficult to get Republican
support for the more expansive tax increases that President
Barack Obama has urged.
Still, the declines of less than 1 percent in the three
major U.S. stock indexes suggest that investors do not believe
the economy will be unduly damaged by the absence of a deal,
said Mark Lehmann, president of JMP Securities, in San
"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 if 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 there."
Banking shares, which outperform during economic expansion
and have led the market on signs of progress on resolving the
fiscal impasse, led declines. Citigroup Inc fell 1.6
percent to $39.49, while Bank of America slid 1.9
percent to $11.29. The KBW Banks index lost 1.19 percent.
Volatility on Friday was exacerbated in part by "quadruple
witching," the quarterly expiration of stock index futures and
options, stock options and single stock futures contracts.
About 8.59 billion shares changed hands on major U.S.
exchanges, more than the daily average of 6.47 billion daily in
2012, in part due to expiration.
The Dow Jones industrial average dropped 120.72
points, or 0.91 percent, to 13,191.00. The Standard & Poor's 500
Index fell 13.52 points, or 0.94 percent, to 1,430.17.
The Nasdaq Composite Index lost 29.38 points, or 0.96
percent, to 3,021.01.
"Amazingly, this sharp decline today may not actually change
the technical picture much - unless the decline gets worse,"
said Larry McMillan, president of options research firm McMillan
Analysis Corp, in a research note.
The day's round of data indicated the economy was
surprisingly resilient in November; consumer spending rose by
the most in three years and a gauge of business investment
But separate data showed consumer sentiment slumped in
December. The S&P Retail Index fell 1.2 percent.
U.S.-listed shares of Research in Motion sank 22.7
percent to $10.91 after the Canadian company, known as the
BlackBerry maker, reported its first-ever decline in its
subscriber numbers on Thursday alongside a new fee structure for
its high-margin services segment.