Obama, GOP Crush Stocks on Path to Fiscal Cliff Showdown

Fiscal cliff talks in Washington turned optimistic just after 5 p.m. ET; however, it didn't filter to Wall Street, where trading closed at session lows on Friday, in the absence of new budget proposals offered at the White House meeting.

The Dow Jones Industrial Average declined 158 points, or 1.1%, closing below 13,000. Dow futures contracts have the index down by over 200 points.

The S&P 500 fell nearly 16 points, or 1.1%, and closed just above the 14,000 level. The Nasdaq dropped 25.6 points, or 0.9%, to 2,960.31.

Shares of all companies in the 30-member Dow fell, with Hewlett-Packard(HPQ) declining the most, at 2.56%. Chevron(CVX) and Exxon Mobil(XOM) were the only other Dow stocks to drop more about 2%. American Express(AXP) , the only rising stock in midday trading, was down slightly by Friday's close.

Lawmakers weren't the only people to change their script on the looming fiscal cliff.

After downgrading the U.S. government's debt rating amid the messy August 2011 debt-limit negotiations, ratings agency Standard & Poor's said on Friday it doesn't expect a fiscal-cliff stalemate to affect its rating of the government's debt. Meanwhile, the prospect of a standoff between Obama and congressional Republicans doesn't appear to raise S&P's alarm that a last-minute deal could contain short-term measures that don't resolve long-term budget issues.

"Standard & Poor's Ratings Services does not expect negotiations over the fiscal cliff to have an impact on its 'AA+/A-1+' ratings on the U.S. federal government," the rating agency said in a press release late Friday.

Still, an 11th-hour agreement that waters down tax hikes or budget cuts would appear to reaffirm S&P's negative outlook on the government's debt rating.

"Our existing negative outlook on the U.S. rating speaks to the risk of a deliberate further loosening of fiscal policy, for example through a material weakening of the Budget Control Act of 2011 without compensating measures," S&P said Friday.

Peter Tchir, head of TF Market Advisors, said he remains "stubbornly optimistic that the politicians do enough over the weekend for a bounce" in stocks.