After another setback in negotiations over the looming fiscal cliff, the U.S. stock market incurred heavy losses on Friday to end the week. The market is starting to price in the very real possibility that there will be no agreement on the budget after a Republican proposal to extend certain lower tax rates was dropped on Thursday evening. Tthe G.O.P. concluded that they did not have the necessary support to put the legislation to a vote.

Stocks were under pressure throughout the day and the Dow Jones Industrial Average closed down 121 points to 13,191. The widely watched blue-chip index traded in a range between 13,122 and 13,310.

The SPDR S&P 500 ETF (SPY) fell 0.90 percent to $142.79. Volume was significantly heavier than normal with around 223 million SPY shares trading hands compared to a 3-month daily average of 136 million. The level of activity was noteworthy considering that under normal circumstances volume should have been extremely light on the last trading day prior to Christmas.

The PowerShares QQQ Trust ETF (QQQ), which tracks the performance of the Nasdaq 100, fell 1.05 percent to $65.20. Among the notable movers on the Nasdaq 100 was Research in Motion (RIMM) which plunged after releasing its third-quarter financial results. The stock initially surged more than 9 percent in Thursday's after-hours session, but ended Friday's trading day down a whopping 23 percent to $10.91.

Crude oil followed the market lower to end the week. NYMEX crude futures, the U.S. benchmark, lost 1.38 percent to $88.90. Brent contracts, the European oil benchmark, lost 0.94 percent to $109.16. In ETF trading, the United States Oil Fund (USO) shed 1.13 percent to $32.36.

Precious metals bounced back from recent losses as traders looked for hedges in the case of a fiscal crisis. COMEX gold futures climbed 0.64 percent to $1,656.50, but remain in a downtrend. Silver futures jumped 1.12 percent to $30.01. The heavily traded SPDR Gold Trust ETF (GLD) closed the session with a gain of 0.39 percent to $160.33.

Weak risk appetite triggered money flows into U.S. Treasuries. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) gained 1.09 percent to $122.25. The yield on the 10-Year Note fell 3 basis points to 1.76 percent.

The U.S. dollar also benefited from safe-haven flows on the day. The PowerShares DB US Dollar Index Bullish ETF (UUP), which tracks the performance of the greenback versus a basket of foreign currencies, added 0.51 percent to $21.76. The closely watched EUR/USD pair closed the week with a loss of 0.54 percent to $1.3175.

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