When you've been waiting more than a month to get something, the last thing you want to hear is that you're not going to get it. That's pretty much the news that investors got at midday today, when Senate Majority Leader Harry Reid said that he couldn't see a way to avoid sending the U.S. over the fiscal cliff. Combined with the Treasury expecting to hit the debt ceiling next Monday, investors sent the Dow Jones Industrials (DJINDICES:^DJI) into a tailspin, falling as much as 150 points. Yet, when news came later that the House would reconvene Sunday to try for a last-gasp solution, the market rallied and, by the close, the Dow cut its losses to just 18 points.
For the most part, the declines were orderly, without any big losing stocks on the day. Cisco Systems (NASDAQ:CSCO) fell 1.4%, as several news sources pointed to CEO John Chambers and his decision last week to adopt a plan to sell a substantial portion of his shares of Cisco stock. Although corporate insiders with big stakes in their companies routinely pare down on their holdings from time to time without it signaling any massive shift in the company's fortunes, the size of Chambers' sale is worrisome to some investors, especially as speculation mounts about how long the current CEO will keep his role.
Alcoa (NYSE:AA) posted a 1.3% loss, giving back its gains from yesterday. Arguably, Alcoa has more to lose from the economic hit that the fiscal cliff could produce, as it has already been struggling for a while. The last thing the aluminum giant needs is a further drag on economic activity in the U.S. and around the world.
Finally, financial stocks American Express (NYSE:AXP) and JPMorgan Chase (NYSE:JPM) finished with losses of about three-quarters of a percent. Banks have been doing well lately, with positive operating revenue and improving credit quality boosting bottom lines of financial stocks. But the fragile recovery for financials could reverse itself if an economic shock hits the system. That's exactly what investors fear about the fiscal cliff and its potentially huge impact on millions of taxpayers.