U.S. stocks sank Monday as investors remain concerned that officials in Washington will fail to resolve a looming fiscal crisis.
With time running out, investors are increasingly concerned about the lack of progress in talks over tax hikes and spending cuts set to kick in automatically on Jan. 1, known as the fiscal cliff.
Stocks fell 1% on Friday after a plan by Speaker John Boehner to avert the fiscal cliff failed to get enough support in the House late Thursday. President Obama spoke about the negotiations Friday evening before leaving for the holiday, urging a scaled-back deal that would stop taxes from rising on 98% of Americans -- something both sides say they want.
No one expects progress on a deal Monday, with members of Congress having left Washington for their homes to celebrate the Christmas holiday.
But investors are still holding out hope for a temporary fix before the end of the year, said Mark Luschini, chief investment strategist at financial advisory firm Janney Montgomery Scott. Such a deal would only forestall the immediate crisis and delay more difficult decisions until later next month, he added.
"If they can avert the worst, the market will find some support," said Luschini. "Absent that, we will definitely see some pressure on equities."
Most federal offices and many businesses were closed on Monday. There are no economic reports or corporate news scheduled for release.
European markets ended a holiday-shortened day mixed, with markets in Germany closed. Italy's Mario Monti said this weekend he may consider a second term as prime minister if asked by parties committed to the economic reforms he began over the past 12 months.
Asian markets ended slightly higher, while markets in Japan were closed.
The U.S. dollar rose versus the euro, British pound and Japanese yen. In the bond market, U.S. Treasuries were lower, with the 10-year note yielding 1.78%. Oil prices fell while gold prices edged higher.