Published December 20, 2012
U.S. stock-index futures sold off after a bill aimed at staving off tax hikes associated with the looming fiscal cliff failed to garner enough support for a vote in the House of Representatives.
As of 7:10 a.m. ET, Dow Jones Industrial Average futures dropped 169 points, or 1.3%, while S&P 500 futures slid 19.3 points, or 1.3%. Early trading in futures markets tends to be volatile because of low volume, especially ahead of a holiday, and isn't always representative of broader market sentiment.
Global markets were broadly lower: The Chinese Hang Seng fell 0.68%, while the Japanese Nikkei 225 dropped 1%. The Euro Stoxx 50, which tracks eurozone blue chips, slipped 0.56%.
House Speaker John Boehner said in a statement that "the House did not take up the tax measure today because it did not have sufficient support from our members to pass." The failure to pass what was seen as a backup plan in the Republican-controlled House came as the latest setback in negotiations aimed at averting the fiscal cliff's painful punch of tax hikes and spending cuts set to hit early next year.
The House will now adjourn until after the Christmas holiday, leaving just days before the end of the year. Boehner called on President Barack Obama and Senate Majority Leader Harry Reid to work out a deal before the House is called back into session.
"This is very damaging. We were already very fragile as it was going into the final few trading days of the year," Todd Schoenberger, managing partner at LandColt Capital said. He said the optimism seen this week on Wall Street is "quickly evaporating."
Schoenberger also noted he expects to see a selloff into the open on Friday that could easily extend into the following week. As of the close of trading on Thursday, the Dow was aiming to close the week with a 1.3% advance, while the S&P 500 had a week-to-date gain of 2.1%.
The House did pass a separate bill that delays spending cuts earlier in the evening, but the White House almost immediately issued a strongly-worded statement saying Obama would veto the bill should it cross his desk. The bill was expected to fail in the Democratic-controlled Senate.
Lawmakers were quick to respond to the setback on Capitol Hill.
"We will see what the stock market does," House Armed Services Committee Chairman Buck McKeon (R-CA) told Fox News' Chad Pergram. "To have this happen, it is very sad for the country."
Echoing that view, Rep. Steven LaTourette (R-OH) told Pergram "it's bad for the country -- I think the markets and other countries are going to react about it."