NEW YORK (MarketWatch) � U.S. stocks closed lower Monday as a measure of factory activity showed an unexpected contraction in November and as politicians again pushed their plans on how to avoid the so-called fiscal cliff.
The Dow Jones Industrial Average DJIA �shed 59.98 points, or 0.5%, to 12,965.60, with 22 out of 30 components finishing the day lower.
The Dow snapped a three-day winning streak.
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With less than 29 days left to the edge of the fiscal cliff, or billions of dollars in spending cuts and tax increases, President Obama took to Twitter, where the White House has more than 3.3 million followers, to make his case on why Bush-era tax reductions should expire for the top 2% of earners. Read blog of president�s Q&A.
House Republican leaders, meanwhile, unveiled a counteroffer to avert the fiscal cliff. The proposal, which counts $800 billion in new revenue through tax reform, takes a �middle ground approach,� according to a statement released by House Speaker John Boehner. Read more on the GOP fiscal cliff counteroffer.
�It remains unclear how much progress is being made in the fiscal-cliff debate, but U.S. equity markets have signaled cautious optimism over the past two weeks that a deal will get done,� said Bill Stone, chief investment strategist at PNC Asset Management Group.
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In economic news, the Institute for Supply Management�s index of manufacturing activity fell to 49.5% in November, signaling a contraction. Economists had expected a reading of 51.7%, or a slight rise in activity. Read more on contraction of U.S. factory activity.
�Lackluster still defines the state of manufacturing due to the issues well known. However, we know the hurricane had a pronounced impact on the economies of the northeast,� offered Peter Boockvar, an equity strategist at Miller Tabak.
�Today�s ISM unfortunately can�t break it out to give us a better feel for the rest of the country. This all said, a deal in the fiscal negotiations, whether good or not, could add clarity that is certainly missing. The S&P 500 above 1,400 is definitely betting on it,� Boockvar added.
The S&P 500 index SPX �fell 6.72 points, or 0.5%, to close at 1,409.46, with materials and industrials hardest hit and telecommunications and technology faring the best among its major sectors.
The Nasdaq Composite COMP �declined 8.04 points, or 0.3%, to close at 3,002.20.
For every two stocks rising three fell on the New York Stock Exchange, where 657 million shares traded and composite volume topped 3 billion by the close.
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�Obama takes questions on Twitter
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� Geithner: GOP will accept tax hike
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Fitch Ratings on Monday warned the tax hikes and spending cuts that make up the fiscal cliff represent the largest credit risk to states next year. The focus on Capitol Hill has been on the tax aspects of the cliff, but states and cities would quickly be impacted by spending reductions, the rating agency said. �Decisions that shift cost of services from the federal to state governments, while requiring the same level of services, would be most concerning,� Fitch warned in a statement.
The warning came a day after U.S. Treasury Secretary Timothy Geithner and Speaker Boehner dug in their heels in an apparent stalemate over avoiding a fiscal crisis in the new year. Read more about battle over higher tax rates for top 2%.
The U.S. dollar DXY �slipped against other currencies, including the euro, while oil futures CLF3 �rose 18 cents to settle at $89.09 a barrel.
Non-cliff notesMarkit�s U.S. manufacturing purchasing managers� index released Monday hit a six-month high of 52.8% in November. Read more on Markit PMI.
Separately, the Commerce Department reported construction spending rose 1.4% in October, above expectations of a 0.5% gain. Read more on October construction spending.
Ahead of Wall Street�s open, stock futures were buoyed by reports showing expansion in manufacturing in China, the world�s second-biggest economy. The National Bureau of Statistics and China Federation of Logistics and Purchasing reported its purchasing managers� index climbed to a seven-month high of 50.6 in November. A separate measure released Monday by HSBC Holdings PLC and Markit Economics rose to 50.5 from 49.5 in October, echoing the official findings, released during the week.
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