Stocks drop sharply, ending week down 2%
New York (CNNMoney) — Stocks closed lower for the fifth straight day Friday, ending the week down nearly 2%, as investors continue to fear the impact of falling over the fiscal cliff.
The S&P 500, the Dow, and the Nasdaq ended the day down between 0.9% and 1.2%. The Dow suffered its steepest loss since Nov. 14.
The selling gained steam in the last few minutes of trading after reports that President Obama wasn't making a new offer during a meeting with congressional leaders at the White House Friday afternoon. Obama had been expected to propose a scaled-back fiscal cliff deal during the meeting.
During the past several days, rumors about both progress and setbacks have caused wild swings in the stock market. Until the last few minutes of trading, Friday's sell-off had been less volatile. Trading volume has been particularly light this week, causing more dramatic moves as news leaked out.
The House of Representatives will be in session Sunday to give its members time to attempt to hammer out a deal.
As hopes for a substantial budget agreement have diminished, all three indexes are on track to end December in the red.
Still, despite recent pressure, stocks have had a pretty stellar year, with all three indexes up between 6% and 14%.
Investors are hoping that leaders will at least be able to reach a breakthrough that will postpone at least some of the automatic tax hikes and spending cuts due to take effect on Jan. 1. Failure to reach a deal could potentially push the U.S. economy into a recession.
Investors shrugged off two better-than-expected economic reports Friday morning. Readings on both the Chicago purchasing managers index and pending home sales for December rose more than expected.
Shares of Hewlett-Packard fell after the company announced that the Department of Justice is investigating possible accounting fraud at Autonomy. After acquiring Autonomy for $11 billion last year, HP took an $8.8 billion writedown related to the acquisition this year.
Shares of Barnes & Noble rose 6% after British publisher Pearson announced that it would invest $90 million for a 5% stake in the retailer's Nook unit.
European markets closed lower. Italy passed its first test of investors' interest since prime minister Mario Monti resigned earlier this month, successfully selling €3 billion in 10-year government bonds Friday.
Asian markets ended stronger. In Japan, which will be closed on Monday, the Nikkei ended the year up more than 20%. The index's recent strong run comes as the yen has been weakening on the prospect of further monetary easing. The Shanghai Composite posted further gains and is poised to end the year in the black.
The U.S. dollar rose against the euro, but dropped against the British pound and the Japanese yen.
The yield on the 10-year Treasury note stayed steady at 1.70%. Oil and gold prices were modestly lower.