Today: Stocks decline in a shortened trading session as politicians doubt long-term solution for "fiscal cliff." Also: Instagram faces possible class-action lawsuit for its user rules, Hewlett-Packard (HPQ) declines and Yahoo (YHOO) gains.
Wall Street drops as politicians doubt long-term 'fiscal cliff' deal
Stocks declined slightly in a shortened Christmas Eve trading session, as concerns about the stalled "fiscal cliff" talks on Capitol Hill produced a second consecutive negative session in a time known for increases dubbed "the Santa rally."
The three major U.S. indexes dropped between 0.2 percent and 0.4 percent in light trading Monday while politicians said that they expected to find a short-term solution to the combination of tax increases and spending cuts scheduled to take place at the end of the year if Congress does not act.
"I think there's unfortunately only going to be a small deal," Sen. Mark Warner, D-Va., said, but he admitted that "it's critical we get to the big deal."
Lawmakers are currently on a holiday break that began on a sour note, after an attempt by the Republican leader of the House to introduce a new plan never made it to the floor for a vote. When they return and get back to discussions on a deal, investors were split on the effect.
"The action last week in Washington flipped the switch for short-term market movement from up to down," D.A. Davidson chief investment strategist Frederic Dickson told Bloomberg News. "The action picks up later in the week, when politicians return to Washington but it's going to take them a couple days to figure out what to do."
Ari Wald, a technical analyst at The PrinceRidge Group, thinks that momentum will flip again, bringing in the typical Christmas-time bounce.
"Right now we've seen some very constructive action in the market, so I think that bodes well for this being a positive seasonal 'Santa' period over the coming seven days," Wald told Reuters.
Still, Wall Street expects a deal will get done eventually, which may be holding stocks from a bigger dip.
"At the 59th minute of the last hour of the last day, they'll agree to something," John Fox, director of research and co-portfolio manager at Fenimore Asset Management, told The Wall Street Journal.
Instagram faces possible class-action lawsuit after debacle
Instagram got a lump of coal in its stocking on Christmas Eve, as a civil lawsuit against the Facebook-owned photo-sharing service was announced Monday in response to its recent terms of services controversy.
The San Francisco company announced new terms of service last week, which prompted a user revolt as the rules stated intentions to use user photos in advertising. Instagram eventually reversed its decision, announcing that it would instead revert to previous regulations regarding users' rights, but that did not make everyone happy again.
A user of the service filed a lawsuit that seeks to become a class-action suit, with the focus on the rights Instagram still claims on photos. The suit claims that users who cancel their Instagram accounts must give up their rights to the photos they had posted through the service.
After a busy week, Facebook gained 2.6 percent to $26.93 on Monday, as Needham increased its price target on the Menlo Park company's stock from $25 to $33.
Hewlett-Packard takes a big dip, Yahoo gains on analyst upgrade
Facebook's gain was not typical in Silicon Valley, as local tech companies matched the major indexes' slight downward movement, with the SV150 dropping 0.3 percent.
Companies heavily invested in personal computers were damaged, as they have been all year. Hewlett-Packard had the biggest loss among the 30 components of the Dow Jones industrial average, dropping 2.3 percent to $14.01, and chip companies Intel (INTC) and Advanced Micro Devices declined 0.6 percent and 4.3 percent respectively. Microsoft dropped 1.4 percent.
Yahoo experienced another nice gain as it continues a strong end of 2012, gaining 1.6 percent to $19.65 after the Sunnyvale company received an upgrade from Needham analyst Laura Martin, like Facebook. The company's stock buyback will drive more advances, Martin wrote, and could push the price up to $26 without any further assistance. Apple (AAPL) received a slight 0.2 percent boost, breaking a run of three straight trading sessions in the red.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 8.41, or 0.28 percent, to 3,012.60
The blue chip Dow Jones industrial average: Down 51.76, or 0.39 percent, to 13,139.08
And the widely watched Standard & Poor's 500 index: Down 3.49, or 0.24 percent, to 1,426.66
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.