DJI - NEW YORK, Dec 21 (Reuters) - U.S. stocks finished lower on Friday after a Republican plan to avoid the "fiscal cliff" failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013.
Still, stocks managed to rebound from the day's lows near the end of the session, and for the week, the three major U.S. stock indexes still ended higher, with the S&P 500 gaining 1.2 percent.
Trading was volatile because of waning confidence in the prospect of a deal out of Washington, and in part, as the result of the quarterly expiration of options and futures contracts. The CBOE Volatility Index or VIX, the market's favorite barometer of investor anxiety, finished below its session high.
Republican House Speaker John Boehner failed to garner enough votes from even his own party to pass his "Plan B" tax bill late on Thursday. It was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession.
"The failure with Plan B was disappointing, if not terribly surprising, but now there’s a real lack of clarity about what will happen, and markets hate that," said Mike Hennessy, managing director of investments for Morgan Creek in Chapel Hill, North Carolina.
The Dow Jones industrial average dropped 120.88 points, or 0.91 percent, to 13,190.84 at the close. The Standard & Poor's 500 Index fell 13.54 points, or 0.94 percent, to 1,430.15. The Nasdaq Composite Index lost 29.38 points, or 0.96 percent, to 3,021.01.
"Amazingly, this sharp decline today may not actually change the technical picture much - unless the decline gets worse," said Larry McMillan, president of options research firm McMillan Analysis Corp, in a research note.
For the week, the Dow gained 0.4 percent and the Nasdaq climbed 1.7 percent.
On Friday, Herbalife dropped for an eighth straight session. Investor Bill Ackman recently ramped up his campaign against the company. The stock skidded 19.2 percent to $27.27 and has lost more than 35 percent this week.
Plan B, which called for tax increases on those who earn $1 million or more a year, was not going to pass the Democratic-led Senate or win acceptance from the White House anyway. But it exposed the reality that it will be difficult to get Republican support for the more expansive tax increases that President Barack Obama has urged.
Still, the declines of about 1 percent in the three major U.S. stock indexes suggest that investors do not believe the economy will be unduly damaged by the absence of a deal, said Mark Lehmann, president of JMP Securities, in San Francisco.
"You could have easily woken up today and seen the market down 300 or 400 points, and everyone would have said, 'That's telling you this is really dire,'" Lehmann said.
"I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don't think we're going to get there."Volatility on Friday was exacerbated in part by "quadruple witching," the quarterly expiration of stock index futures and options, stock options and single stock futures contracts.
About 8.59 billion shares changed hands on major U.S. exchanges, more than the daily average of 6.47 billion daily in 2012, in part because of the "quadruple witching" expiration.
The day's round of data indicated the economy was surprisingly resilient in November; consumer spending rose by the most in three years and a gauge of business investment jumped.
NYMEX - NEW YORK, Dec 21 (Reuters) - U.S. crude futures fell more than 1 percent on Friday as faltering efforts to negotiate a U.S. budget reinforced fears a deal would not get done to avoid mandated tax hikes and spending cuts that could curb the economy and demand for petroleum.
CBOT - Chicago Board of Trade soybean futures were higher on bargain buying following the nearly 5 percent price tumble over the past week, traders said.
* USDA said on Friday that a 110,000 tonne soybean sale to unknown destinations for 2012/13 delivery that was announced on Tuesday was incorrect. The agency said it was a domestic sale, not an export sale.
· Spot basis bids for soybeans held mostly steady in the Midwest on Friday as snowfall and winds reduced the already slow pace of deliveries of the crop to market, grain merchants said.
· The first major snowstorm of winter did little to ease the worst drought in more than 50 years in the crop growing central U.S. Plains and Midwest, while snarling traffic and hampering feeding and transportation of livestock.
· Key resistance for the March contract is at its 200-day moving average of $14.74-1/2. The nine-day relative strength index is at 40.
FCPO - SINGAPORE, Dec 21 (Reuters) - Malaysian palm oil futures touched a more-than-three-week high on Friday, posting their first weekly gain in five weeks as traders sought to cover short positions amid optimism for a zero export tax on crude palm oil in early 2013 to cut stocks.
Palm oil posted a 5.9 percent gain on the week, its best performance this year, after the edible oil suffered four straight weeks of losses on record high stocks.
"There's a technical break above the resistance level at 2,381 ringgit per tonne, and prices should remain supported above the 2,370 ringgit level," said a dealer with a foreign commodities brokerage in Malaysia. "One factor could be the pre-weekend short cover."
At the close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange was up 3.8 percent to settle at 2,409 ringgit ($788) per tonne, just off a high at 2,410 ringgit, a level last seen on Nov. 28.
Total traded volumes stood at 33,240 lots of 25 tonnes each, higher than the usual 25,000 lots.
Technical analysis showed palm oil is expected to test resistance at 2,381 ringgit per tonne and a bullish target at 2,419 ringgit has been established, Reuters market analyst Wang Tao said.
A small surprise increase in Malaysia's palm exports for the first 20 days of the month also injected cheer in the market, with cargo surveyor Societe Generale de Surveillance reporting a slight increase of 0.5 percent in shipments for the period from a month ago.
A jump in crude palm oil exports during the period, which shows companies are pushing out exports ahead of the year-end expiry of their duty-free quota, could help ease record-high stocks in the No.2 palm producer.
Analysts, however, cautioned against an overly optimistic view on inventory levels, citing lower demand from the northern hemisphere, where the edible oil tends to solidify in winter.
"Hence, despite the expected December month-on-month production decline of 12 percent, inventory should stay persistently high at above 2.5 million tonnes," Alan Lim Seong Chun, an analyst with Malaysia's Kenanga Investment Bank, said in a research note.
"Looking ahead to first quarter 2013, we expect the inventory to decline only marginally and to stay above 2 million tonnes and limit the price upside to below 3,000 ringgit."
Brent crude fell below $110 a barrel on Friday after talks in the United States to avert a budget crisis stalled, reviving worries about demand in the world's biggest oil consumer.
Palm oil prices were also supported by gains in competing vegetable oil markets. U.S. soyoil for January delivery gained 1.8 percent in late Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.6 percent higher.
Regional Equties - BANGKOK, Dec 21 (Reuters) - Philippine stocks ended higher on Friday, resuming a gain on the week, as investors built up positions in blue chips like banks amid ratings upgrade hopes, while other overbought markets retreated as concerns about U.S. fiscal cliff prompted selling.
The Philippine index rose for a fourth session, adding 0.5 percent and was up 2.1 percent on the week, reversing last week's 1.5 percent loss. It ended at 5,823.94, slightly off the previous record close of 5,831.50 set on Dec. 11.
Shares in Metropolitan Bank & Trust Co , the second biggest lender by assets, advanced 2.1 percent, extending gains for a third session, after Moody's changed Philippine banking system outlook to positive
Vietnam fell 0.7 percent after a two-day rally that had taken it into overbought territory. Its 14-day relative strength index (RSI) eased to 64.8 on Friday from Thursday's 72.46, above the threshold 70 that indicates an overbought market.
Singapore , Malaysia and Thailand also traded in overbought conditions, pulled lower.
Foreign investors turned net sellers on Friday for a net 48 million ringgit ($15.71 million) after three days of buying for a combined 161 million ringgit ($53 million), the Malaysian bourse said.
Indonesia was down 0.1 percent, the fourth session of falls. With a weekly loss of 1.4 percent, it was the region's worst performer.
