Market dips over ‘fiscal cliff’ worries

The Toronto stock market closed lower Friday amid growing skepticism about whether lawmakers can keep the U.S. economy from going over the so-called fiscal cliff.

The S&P/TSX composite index dropped 57.65 points to 12,316.12 as the clock ticked toward huge spending cuts and significant tax increases that will automatically click in after Dec. 31 if there is no deal.

The U.S. economy is already weak and economists warn the imposition of those measures could tip the U.S. back into recession and depress other economies around the globe unless the White House and Congress find a compromise budget plan.

The TSX Venture Exchange was ahead 5.09 points to 1,201.84.

The Canadian dollar was down US0.16¢ at US100.35¢.

U.S. markets were also depressed with the Dow industrials down 158.2 points to 12,938.11, the Nasdaq off 25.60 points at 2,960.31 and the S&P 500 index down 15.67 points at 1,402.43.

Traders had looked forward to a midafternoon meeting at the White House for last-minute talks. But losses deepened in the last minutes of the session amid reports that President Barack Obama was not presenting a new budget offer to congressional leaders.

Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

North American markets lost ground this shortened trading week as top U.S. lawmakers continued to cast blame on each other for the fiscal-cliff impasse while portraying themselves as open to a reasonable last-minute bargain.

The TSX declined 0.6% while the Dow industrials gave back 1.9%.

Traders have been focusing on Washington and the budget negotiations since the Nov. 6 presidential election returned a divided government to power.

“I can’t wait till this is done, so we can start talking about markets again and not just about politics,” said Doug Cote, chief market strategist at ING Investment Management, adding he doesn’t expect lawmakers will reach a deal by the deadline.

Traders took note of an apparent improvement in the housing sector as the number of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years.

The U.S. National Association of Realtors said its seasonally adjusted pending home sales index rose 1.7% in November from October to 106.4.

The increase points to higher sales of previously occupied homes in the coming months. There’s generally a one- to twomonth lag between a signed contract and a completed sale.