Investors seemed to get an early lump of coal for Christmas as the Dow Jones Industrial Average (^DJI +0.59%) plummeted 120 points, or 0.9%, today. The culprit? Dimming hopes for a deal to avert the fiscal cliff as House Republicans failed to pass Speaker John Boehner's "Plan B," which President Obama had promised to veto anyway.
After trading closed today, President Obama asked Congress to pass a scaled-back plan before year's end that would head off much of the damage of the fiscal cliff including middle-class tax increases.
Beyond the cliff negotiations, the market received some good news as orders for durable goods increased well ahead of expectations, as did personal spending and income. The Michigan consumer sentiment index, however, came in lower than expected, likely because of the failure to resolve the fiscal cliff.
On the Dow today, all but two of the 30 components fell. The usual suspects led the hit parade today, as financials and industrial stocks bore the brunt of the fall. Bank of America (BAC +0.54%) was the worst performer, falling by 2% despite being on fire recently, climbing more than 25% in just over a month. Today's drop seemed to be nothing more than a product of B of A's high volatility.
ExxonMobil (XOM 1.38%) also dropped 1.9% as oil prices fell and Iraq said it would not pay oil companies, including Exxon and Chevron, operating in Kurdistan because they did not meet their necessary production quotas.
The biggest winner today was American Express, which gained 0.4%, assisted by the gains in personal income and spending, which should help feed its credit card empire.
Outside the Dow, Research in Motion (RIMM +2.35%) fell by a whopping 23% after reporting earnings last night. The troubled Blackberry maker actually beat earnings estimates, though it still reported a significant loss, but the company showed a decline in subscribers for the first time ever. Concerns about a new fee structure in its highly profitable services segment also had investors running for the exits.
Finally, Herbalife (HLF 1.64%) continued its collapse, falling 19% today and more than 35% over the last three days as the market reacted to fund manager Bill Ackman's presentation yesterday about why he's shorting the stock. Among other issues, Ackman has accused the company of being a pyramid scheme and said that much of its profits are driven by conning would-be salespeople out of their own up-front investments, which are required in order to work as a distributor. Herbalife management has planned an "analyst day" for January to provide a detailed defense of the company and an explanation of its business model.
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