NEW YORK (CNNMoney)
U.S. stocks opened lower Monday as investors continue to dial back expectations that officials in Washington will prevent tax hikes and spending cuts from kicking in on Tuesday.
The Dow Jones Industrial average fell 0.3%, the S&P 500 was down 0.2% and the Nasdaq declined 0.1%. U.S. stocks sold off Friday, ending the week down 2%, as investors brace for the fiscal cliff reckoning.
European markets were holding steady in an abbreviated session. But Asian stocks got a boost from strong manufacturing data out of China. The Shanghai Composite, one of the world's worst performing indexes, managed to eke out a 3% gain for the year and the Nikkei, which was closed Monday, ended the year with a 20% gain.
Investors are hoping that leaders will reach some sort of deal that will postpone at least some of the automatic tax hikes and spending cuts due to take effect on Jan. 1.
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Congressional negotiators were at work Sunday, but went home without a deal. Senate Majority Leader Harry Reid said Sunday there is "still significant distance between the two sides." Talks will continue Monday.
While a deal on the fiscal cliff is still theoretically possible, the ideological divide in Washington makes it unlikely that any substantial progress will be made on the nation's debt problems anytime soon, said Steven Ricchiuto, chief economist Mizuho Securities USA.
"Even a small deal has been and will remain elusive," said Ricchiuto. "It is still a high probability event that at the 11th hour they will simply kick the can down the road for a few weeks to allow for continued pointless discussion."
Despite all the uncertainty, stocks have overall had a pretty good year, with all three indexes up between 6% and 14%. By comparison, stocks ended 2011 almost exactly where prices were at the start of the year, although there was a lot of up and down in between.
Related: S&P 500 winners and losers 2012
On the last day of 2012, there is little news to distract investors from the fiscal cliff talks. There are no economic reports on tap, and not much in the way of company news.
An exception was a $665 million deal announced late Sunday to buy investment banking firm Duff & Phelps (DUF) by a joint venture led by the Carlyle Group (CG). The offer price represented a 19% premium over Duff & Phelps' stock close Friday.
U.S. stocks closed lower for the fifth straight day Friday, ending the week down nearly 2%.
Meanwhile, oil prices eased and gold prices edged higher. The yield on the 10-year U.S. Treasury note rose to 1.72%. The U.S. dollar gained versus the euro and the yen, but fell against the British pound.
First Published: December 31, 2012: 9:37 AM ET
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