DJI - NEW YORK, Dec 19 (Reuters) - U.S. stocks sold off late in the day to close at session lows on Wednesday as talks to avert a year-end fiscal crisis turned sour, even as investors still expect a deal.
The S&P 500 slipped after a two-day rally that took the benchmark index to its highest close in two months. Defensive-oriented shares led the decliners, including health care and consumer staples.
General Motors bucked the overall weakness to surge 6.6 percent to $27.18 after the automaker said it will buy back 200 million of its shares from the U.S. Treasury, which plans to sell the rest of its GM stake over the next 15 months.
President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could send the U.S. economy into recession.
House Speaker John Boehner, the top Republican in Congress, said in a one-minute press conference that his chamber will pass a proposal that Obama had already threatened to veto as it spares many wealthy Americans from tax hikes needed to balance the budget. Obama has already agreed to reductions in benefits for senior citizens.
"My guess is they’re close to a deal, and right before, it looks like the deal is about to blow up either on manufactured or legitimate reasons," said Uri Landesman, president of hedge fund Platinum Partners in New York.
He said if the market thought a deal was in real danger, the S&P 500 would slide below 1,400. It stands now near 1,435, not far from a two-month high.Landesman said the VIX's stability indicates "the bulls have control of this market still."
Banks and energy shares - groups that outperform during periods of economic expansion - have led recent gains, indicating a shift to focusing on a growing economy as Wall Street looks past the budget talks.
The Dow Jones industrial average dropped 98.99 points, or 0.74 percent, to 13,251.97. The S&P 500 lost 10.98 points, or 0.76 percent, to 1,435.81. The Nasdaq Composite fell 10.17 points, or 0.33 percent, to 3,044.36.
NYMEX - TOKYO, Dec 19 (Reuters) - U.S. crude futures were steady near $88 a barrel on Wednesday, holding gains made over the past three days, supported by optimism that a deal could be struck to avert a U.S. budget crisis and keep the world's top oil consumer from slipping into recession.
CBOT Soyoil - Chicago Board of Trade soybean futures were lower on an outlook for a record large U.S. soybean plantings next year and on improving soil moisture prospects in some areas of the U.S. growing region, traders said.
* Private analytics firm Informa Economics lowered its
soybean acreage view for the U.S. for 2013 to 78.962 million, from 80.1 million but still surpassing the previous record of 77.451 million planted in 2009. Plantings in 2012 totaled 77.2 million.
· Cash basis bids for soybeans were mostly steady in the U.S. Midwest on Wednesday as light country offerings balanced the relatively limited demand for the commodity from exporters and processors, dealers said.
· Analysts were expecting the USDA export sales report on Thursday to show U.S. soybean sales last week between 650,000 to 850,000 tonnes.
· Heavy snowfall of 3 to 6 inches in the U.S. Plains and 8 to 12 inches in the northwest Midwest is expected today and tomorrow, according to John Dee, meteorologist for Global Weather Monitoring. But a storm system that had been expected in the same areas next week has been removed from the forecast, he said.
· The heaviest snow in the Midwest will be in southeast Iowa, southeast Minnesota and southern Wisconsin and there also should be a half inch to 1.00 inch of rain in most of the Midwest, he said.
· "Eastern Colorado, the northern half of Kansas and Nebraska will receive three to six inches of snow the next 24 hours with pockets of heavier snow," Dee said. Dee said the snow and some associated rainfall would help buoy soil moisture
· levels and help stabilize river water levels. "It will be quiet tomorrow through next week and there are no cold air threats," he said.
· Key resistance for the January contract is at its 200-day moving average of $14.73-1/2 per bushel. The nine-day relative strength index is at 37.
FCPO - KUALA LUMPUR, Dec 19 (Reuters) - Malaysian palm oil futures inched lower for a second day on Wednesday as sluggish exports in the first half of the month fan concerns that stockpiles in the world's No.2 producer could hit another record high.
Weaker demand from top food consumers China and India early this month have traders worried that seasonally slowing output might not be enough to cut inventory levels, weighing on prices that have lost almost 27 percent this year.
Demand might have tapered off as palm oil tends to solidify in the northern hemisphere's current winter season, prompting buyers switch to competing soy oil, which has a lower freezing point.
"The major factor is still the end stock," said a trader with a foreign commodities brokerage in Malaysia. "The fear is still there -- that stocks are not going to draw down further if exports don't pick up the second half of this month."
The benchmark March contract on the Bursa Malaysia Derivatives Exchange fell 0.5 percent to close at 2,330 ringgit ($763) per tonne. Prices kept at a tight range of 2,313 - 2,338 ringgit per tonne.
Total traded volumes stood at 25,722 lots of 25 tonnes each, only slightly higher than the usual 25,000 lots, as some investors wound up positions ahead of the year-end.
Technical analysis showed palm oil prices remained unchanged at a bearish target of 2,285 ringgit, Reuters market analyst Wang Tao said.
Investors are pinning their hopes on the government's new crude palm oil export tax regime, set at zero for January, to help spur shipments of the grade and cut down record stocks, which hit 2.56 million tonnes in November.
"The case in the market is whether export demand can hold up and continue. That's why we are seeing palm oil pricing at such a large discount to other oils," said ANZ agricultural and commodity strategist Victor Thianpiriya in Singapore.
"We don't see the potential for a dramatic pick up in prices until early next year, and that's only if export demand continues to be strong."
Brent oil rose above $109 a barrel on Wednesday on expectations that a budget crisis in the United States will be resolved, saving the world's top oil consumer from slipping into recession.
In other competing vegetable oil markets, U.S. soyoil for January delivery edged up 0.4 percent in late Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.9 percent lower.
Regional Equities - BANGKOK, Dec 19 (Reuters) - Philippine shares jumped 2.1 percent on Wednesday, their biggest one day rise in six months, after Moody's upgraded its outlook on the Philippine banking system while Thai stocks hit 17-year peak amid global appetite for risky assets.
Shares of banks led the rally in Manila, with Bank of the Philippine Islands up 3.2 percent and BDO Unibank Inc up 2.8 percent, sending the broader Philippine Composite index to 5,752.39.
The Philippine index had risen 31.6 percent so far this year, Southeast Asia's second best performer. It surged to a record finish of 5,831.50 on Dec. 11, entering extreme overbought readings and prompting a technical-led selling, traders said.
Market investors were hopeful of a prospect of sovereign rating upgrade which was supportive for further market rise, they said.
A Reuters analysis of Philippines companies with a market cap of greater than $50 million shows that the broker recommendations have not changed materially over the last 90 days.
The average rating score of the Philippines stocks went up marginally over the last 90 days to 2.39 from 2.47, Thomson Reuters data showed.
Thailand's SET index finished at 1,378.40, the highest since February 1996. Vietnam rose 1.3 percent to a two-month high as brokers kept positive views.
