By Ryan Vlastelica and Blaise Robinson
Dec 31 (Reuters) - U.S. stock index futures signalled a
slightly higher open on Wall Street on Monday, with stocks set
to snap a five-session losing streak as talks continued in
Washington over resolving the "fiscal cliff".
Futures for the S&P 500 were up 0.43 percent, Dow
Jones futures up 0.23 percent and Nasdaq 100
futures up 0.09 percent at 0825 GMT.
European markets were slightly down on Monday morning,
although trading was muted as markets in Germany, Switzerland,
Italy, Denmark, Norway, and Sweden were closed while UK, French,
Dutch and Spanish markets were only open for half a session.
Negotiations were set to continue on Monday between
lawmakers and the White House on how to deal with the $600
billion in automatic tax hikes and spending cuts that kick in at
the start of January and could drag the economy in recession.
The Senate reconvenes on Monday after the open of equity
trading with only hours to find some sort of stop-gap deal that
would also have to be passed by the House of Representatives.
Despite the slight gains indicated by futures, stocks still
could end up falling on Monday when the cash markets open if
there is no sign lawmakers are making progress.
While hope has largely evaporated for any sort of broad
deal, the lack of panic on markets shows that investors still
expect officials to find a solution to the budget problems early
in the New Year. The measures that kick in on Jan. 1 will also
only have a gradual impact.
"There is always a chance for a massive stalemate, and we
could see a lot more volatility if we get to a point where
there's no more hope. Right now there's still hope," said Adam
Sarhan, chief executive of Sarhan Capital in New York.
Midnight on Monday marks the deadline for a deal, though the
government can pass legislation in 2013 that retroactively
prevents going over the cliff, an option that is viewed as
"At some point, someone will have to blink, or Congress will
just come in early in 2013 and vote for a tax cut," Sarhan said.
"Something will be done to resolve this."
Stocks dropped on Friday, with significant losses in the
last minutes of trading, as prospects for a deal worsened at the
beginning of the weekend.
The rise in the futures market on Monday does not
necessarily suggest a rally in the making. The cash market and
futures markets closed with a wide gulf on Friday, by virtue of
the extra 15 minutes of trading in futures.
The S&P 500 closed at 1,402.43 at 4 p.m. ET on Friday, down
1.1 percent, but futures continued to fall before closing 15
minutes later with a loss of 1.9 percent. S&P futures and the
S&P cash index don't match point-by-point, but that kind of
disparity points to a weak opening in stocks on Monday.
One hour before they had hoped to present a plan on Sunday,
Democratic and Republican Senate leaders said they were still
unable to reach a compromise.
Earlier in the day, President Barack Obama, appearing on
NBC's "Meet the Press," said investors could begin to show
greater concerns in the new year.
"If people start seeing that on January 1st this problem
still hasn't been solved ... then obviously that's going to have
an adverse reaction in the markets," he said.
Investors have remained relatively sanguine about the
process, believing that it will eventually be solved. In the
past two months markets have not shown the kind of volatility
that was present during the fight to raise the debt ceiling in
The Dow industrials and the S&P 500 each lost 1.9 percent
last week, after stocks fell for five straight sessions, which
marked the S&P 500's longest losing streak in three months.
Equities have largely performed well in the last two months
despite constant chatter about the fiscal cliff, but the last
few days shows a bit of increased worry.
The CBOE Volatility Index rose to its highest level
since June on Friday, closing at 22.72.