today the markets spoke up a bit. it may start to shout much louder in the coming days, if real progress is not made soon. so what should be done? should each side succumb to their sacred cows? don't touch entitlements. don't raise taxes on nine. ever. we know what happens in these scenarios. i think today's stock market decline was just a preview of coming attractions. as always, we are on this story and will continue to be on it for you. that will do it for "the closing bell." thank you so much for being with me tonight. president obama about to make a statement on the negotiations in washington. we're going to send it over to "opposites action" as we preview what the president's about to say. have a great weekend, everybody. i'll see you monday. breaking news this hour. you're looking at a live shot of the briefing room at the white house where we're awaiting comments on the fiscal cliff from president obama. we'll bring you those comments as soon as they begin. the story on wall street today was washington. the back and forth on the fiscal cliff negotiations sending the markets sharply lower. and so, what do we make of it

here, dan? friday afternoon, we're awaiting the president to be joined by senate majority leader harry reid to make a statement on these talks into the weekend. >> in some ways i would say the reaction today, the ultimate reaction ended up being a tad muted in a lot of ways when you think about it. because the overnight lows were down 3%. in the s&p. so we closed down about 1% here and so here's a situation where i think the options market kind of has this a little bit. the six futures curve started ticking up earlier in the week in kind of a precursor to some of the equity weakness we saw today. in a lot of senses a pretty quarterly sellover. >> i agree with that. one of the things we saw in the options market. we've spoken about this many times. there are holidays coming up, if you back the holidays out, we're expecting greater than expected volatility at a time when you expect to see it more muted. one of the things we also saw today, though, is that expectations of volatility on fiscal cliff conversations get a little bit more muted when you see that the market didn't

respond as badly as you might think. we're still up over the course of the last month. 5.5% over the course of the last 30 calendar days or so. up on the year. up on the week. i don't really feel like these are, you know, such catastrophic things. they're about to speak and my expectation here is more rhetoric. who is there? harry reid and the president. where's boehner? >> that's a good question, because if these sides, if president obama digs in his heels and john boehner did that to a certain extent, although he did leave the door open to working with democrats on a deal, we could see much more market reaction on monday in terms of risk to the downside at this point. >> monday is going to be a holiday shortened day. trading starts at 1:00 p.m. eastern. i wouldn't expect a whole heck of a lot of fireworks. next week remember there's less than six trading days left on the year. to me there's a lot of people with the s&p up 13.5% who are well vested in this thing not falling apart in the last few days because of shenanigans going on in washington.

so you may see some window dressing. i do not expect things to fall apart. but i will tell you this, if there's any positive rhetoric and the thing moves higher, we get the s&p over 1450. the higher we go, very likely the lower we go in early january. >> how do you think we're setting up? dan makes a good point in terms of holiday lightened volume on monday, shortened trading day. we'ven up in the markets going into the last final hours of the fiscal cliff negotiations and it does seem like we're setting up to the downside. the risk seems to be to the downside. >> i agree. obviously if you risk some of those things, before the show we were talking with carter about it, saying what does it look like technically? his point was it's not setting up all that well. we're probably going to look at messy sideways or downward kind of pressure in this kind of a situation. that's exactly what i would expect. from a practical standpoint you're seeing some of these gains. what possible event is now going to propel further gains. >> let's bring in scott nations from chicago. scott, how do you perceive

traders to be setting up for what could be a very volatile week? although a holiday shortened week next week? >> i don't think any traders are really surprised that we saw the action we saw today. if anything, it's surprising, dan touched on this, the fact that the market didn't continue to sell off. and i think it's also interesting that the vix came in a little bit late in the day. the vix has not been as low recently as you might have -- as you might think it would be given that we haven't seen a whole lot of volatility. today is the first day that we've seen some. but i think what that says is, you've had an opportunity to put some protection on. and given that the s&p actually closed the week higher than it opened the week, you can still put some protection on. they aren't incredibly expensive, and if we get some wimpiness throughout the rest of next week then you'll have some protection on pretty good lows. >> no surprise here in today's session we did see some steeper losses, steeper in terms of compared to the broader markets. sectors really led us higher,

financials were down, bank of america down 2%. what do we see in terms of the future of these stocks going into the new year? >> that's a great point. especially names like bank of america, when it broke out at 10, and broke out again at 11 and so we saw people buying the stripes and slightly upside stripes. out until a few months out. you're seeing people monetizing, taking some profits. to me it was a beta chase to a lot of those names into the end of the year. it makes sense to come out of them, when you hold options. they're going to decay over the holidays. if you got that move and you think that there's some momentum you get out and take your win. >> one of the other things, we saw a lot of options activity in names unrelated to the fiscal cliff this week as well. which is something we haven't touched on. i think that we should probably mention that some of those other stocks like herbalife shouldn't get entirely ignored. one of the points i would make, the oil names, industrial names, volatilities are not that high. because in my correlations drop off a little bit, actually for those people looking to get a

little bit of beta using options those are some of the places where it's not that expensive. what's happening right now is that you have some of those stocks that have been beaten up pretty severely. you have some potential for upside gains. >> the turnaround surprisingly midsection was shares of apple. apple earlier in this session down about 1.5% more at some point. finishing the day down by about half a percent. people seeming want to get in, re-establish position. >> apple was underporping in the morning, did firm up towards the end of the day. to me apple is a really tough stock down here. i was saying all week that apple does not act well below 525. it's really back here and it doesn't really look like it's ready to make a move to 550 or higher. the next data move for apple is going to be their earnings into late january. there's been so many conflicting data points. just yesterday we had susquehanna and bernstein negative on the name.

it continues to come. the stock can't get out of its own way. the technical setup is getting a little challenging. i think it's going to break 500 pretty soon and be a story independent of the market. >> it also sets up a great opportunity this case is one of the names where applied volatilities are quite high. because you have headwinds for the stock, for those people holding it thinking gee, i want to get a little more money out of this, i think you should be taking advantage of the high elevated premiums that you to the upside calls on apple, use that as an opportunity to collect a little bit of yield. i think you're going to be in a range bound situation. 450, 550 is probably the range in apple. selling the strikes is probably a good way to collect the money. >> we are awaiting president obama's comments about the fiscal cliff. as soon as he walks onto the stage we will go to him. in the meantime, let's go to cnbc washington correspondent john harwood for the latest. >> it was interesting, i was just talking to a republican leadership aide a few moments ago who said what he expects is that the president will offer a

slimmed-down deal to get us past the cliff next week. he described it as salvage work after the collapse of the negotiations. but we don't know that for sure. the president's been meeting with harry reid at the white house, trying to figure out a strategy. they've had a choice between whether to try to revive a bipartisan deal that would involve mitch mcconnell the republican leader, harry reid and the president, maybe even john boehner, try to pass it in the senate next week and move it over to the house or just do something very bare bones, temporary extension of the tax cuts for people under $ 250,000 a month or so, temporary spending cuts for a month or so to put off the sequester. maybe deal with the doc fix, the addressing what doctors get for treating medicare patients, extend unemployment insurance. those kind of things could be in a small deal that the congress could pass, and avoid the rattling the markets and rattling americans by going over the cliff. but we've got to see what the president and harry reid have cooked up. >> if that slimmeddown version

is presented to the republicans, john, would you anticipate that that would pass? >> i would. the implication from this republican aide was that that's the kind of thing that would get us through the next ten days. get it past the senate. get it past the house. and we go to fight another day. i'm not sure that that is ultimately going to be satisfactory. it might require john boehner to put a bill on the house floor that does not have the support of most republicans. it would pass with democratic votes and maybe a minority of republicans. that's a dangerous thing for a republican speaker with his caucus to do. but that could be the only option to get something through at the very last minute. >> john, was this always the way house's plan "b"? after you consider boehner's flop on his plan "b" were they always going to be the big boys here and put something out there once the republicans kind of stubbed their toe here? and is this something that they always thought that they could get by once the republicans

couldn't get a bill through the house. >> certainly a fallback. and it's always been a fallback, the idea of the small deal. but i think the president wanted a big one. he also has another fallback which is to go over the cliff. that would perhaps put republicans in a better position to either vote for acquiesce in separating tax cuts for the wealthy from tax cuts for people under some income threshold, whether it's $500,000 or $400,000 or $250,000. and the reason being that after january 1st those tax rates will be back up at the clinton era levels and anything that gets proposed is going to be a tax cut from those levels. so that is one reason why going over the cliff, if you could figure out a way to avoid a catastrophic impact on the military, would be a reason to do that and try to cut a deal in january. >> john was part of this slimmed-down bill possibly be payroll tax cut extensions? >> i wouldn't expect it. not impossible, because, some of

the zeal for that proposal has ebbed a little bit on both sides of the aisle. in part because cutting the payroll tax, of course, is something that -- is what funds social security and one of the things we're debating is the solvency long-term of the entitlement programs, medicare and social security. possible but i wouldn't actually expect that. especially if the fallback deal includes the extension of the tax cuts for the middle class and below. that's how the administration could say i protected the middle class. we're letting the payroll tax come up back and negotiate tax reform measures and entitlement reforms further down the road. >> although this mini bill, the slimmed down deal, is for ten days. that's not very much time, is it? >> no the further down the road would arrive very quickly in that event. it would likely be for the month of january. it would be a little bit more than ten days. but you're exactly right, we'll be right back in this situation

if they do a temporary fix. >> how quickly could we be looking at the the approval of a slimmeddown deal? >> pretty quickly.-down deal? >> pretty quickly. you've got congress coming back after christmas. they could move that quickly if they wanted to. >> john, thank you. we'll see you on the other side. we're going to take a quick break. again, president obama expects to make comments shortly. we'll go to the white house as soon as he's up there. stay tuned. [ male announcer ] trading's like a high-speed train. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account.

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if you're just joining us we are awaiting president obama to make some comments from the white house about the fiscal cliff. we're expecting him to be joined by the senate majority leader harry reid of nevada. as soon as the president approaches that podium we will go straight to him. but of course we do want to talk about the markets because the story of the day was the impact of washington, and the inability to get a deal done on the markets. we're here with the options action traders and carter braxtonworth of oppenheimer. how do the markets look as we set up going into 2013? >> sure. well i mean, holding aside the news today, if one were just to look at the last four or five weeks we've moved on the s&p from 1343 to 1443, 100 point move, 7%. it's perfectly normal to have a 1%, 2% pullback. the issue is this. right now the s&p is the worst performing bourse or index of 24 developed countries. britain, germany, france, portugal, you pick it, canada. it's not a particularly robust

period with u.s. equities and we think q1 is going to be sloppy. in fact if there's any asymmetry it's downside risk, of course, then very little upside potential. >> carter makes a good point in that other markets may look better at this point given the downside risk that we might have, especially if this as john harwood said expected to be some sort of a slimmed-down deal where we're kicking the can down the road for a period of a couple weeks, a month or so, we don't have any resolution in the first month of the year either. >> some ways, you know, the fiscal cliff and sandy even earlier in the quarter, these were the mulligans for a lot of companies as we come to the end of q4. we're going to see some preannouncements in january, negative earnings preannouncements and hear a lot of the disruption in washington and some of these natural disasters that affected earnings. but again we have to come back to evgs. and you know, to me, what carter just mentioned about some of the emerging markets outperforming and europe, so underperformed in 2011, this could be a year next

year of underperformance by the u.s., and we're already seeing some u.s. multinationals, you know, that are really strained not only domestically, but the world's, you know, abroad. there may be better growth opportunities. >> overall, corporate earnings growth is going to be driven by a couple of things. you need to have widening margins or expanding top lines. the margin issue has largely been used up. it's been -- you have the benefit, all those deficiencies that have taken place plus an exceptionally low cost of capital driven by low interest rates. the margins are probably as wide as they're going to get. we don't see a really robust economic picture either. this story makes that a little bit worse. analysts have been pretty optimistic about earnings growth for u.s. companies for a number of years and you usually don't get that ad infinitum at a 45 degree angle. so the expectation for earnings growth, we have to mute our expectations somewhat. >> we already heard so many conference calls during earnings season the excuse of the fiscal cliff delaying the ability to make decisions regarding purchasing. if we do extend that into one month of the year, that could

also really throw a wrench into first quarter earnings as well and be head winds to the market well through the march/april time frame. >> and markets hate uncertainty. so if you have companies that just get by the skin of their teeth in q4 and they give a very murky outlook for q2 or the balance of 2013 it's not going to be good for the markets. so that's one reason why january, you know, like i think people will give the market a pass. i think we'll see some window dressing next week, but early january could be kind of ugly, especially as people are repositioning for this new volatility issue. >> you're exactly right. you make two points. the market will give some of these companies a pass. they did in just this most recent earnings cycle. what we saw was a lot of disappointing topline reports. more than 50% of the s&p had disappointed on the revenue side although the earnings were okay. i think that's a perfect example. >> all right. we're going to take a quick break as we await president obama. [ male announcer ] trading's like a high-speed train.

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make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account. welcome back. that's a live picture much the white house where we are waiting president obama to make some statements regarding the fiscal cliff negotiations. let's go back down to washington, d.c. and check in

with john harwood. again your reporting indicates some sort of slimmed-down offer at this point? >> that's what republican leaders expect the ultimate solution to be and what the president and harry reid may offer today. keep in mind that harry reid on the senate floor today said the house should simply take up the bill the senate passed last year or a few months ago which would extend tax cuts for everybody, all families under $250,000 of income. i think that is quite unlikely because that was essentially a democratic bill. i think you'd have to see that bill tweaked or adjusted to have some spending cuts to turn off the sequester. maybe temporary spending cuts. you'd have to probably deal with unemployment insurance, which was not addressed in that bill, with the estate tax, which was not addressed. and remember the estate tax is about to go up sharply from 35% to 55% if no action is taken. and i would expect the democrats

would want to take that, as well. there's some democrats who are very concerned about having the estate tax go up to 55. there are several moving parts but the smaller and shorter of any deal is the easier it is to pass, and we're in a stage of this game where there's so few days left that ease is pretty high value right now. >> and again let's say this gets put out, how quickly could we be looking at a mini bargain? >> we have a mini bargain, you know, house has left. >> yeah. >> senate is leaving. they come back the 26th or the 27th and they can -- leaders can move things on capitol hill about as quickly as they want to, assuming that they can calm down members of their own base and prevent some sort of revolt. i think leaders with a slimmed-down deal will probably be able to do that, especially after the fiasco that house republican leaders suffered last night. it was humiliating for john boehner. republicans know in their gut that this is bad for the party. it's hard for them to behave differently and that's why the president's hoping to use his

public opinion to make them do so. >> so potentially by the end of the week it sounds like? >> by the end of next week. >> exactly. exactly. >> that's correct. next friday, the 28th. we still got a couple of days after that, the following weekend, before the tax increases and sequester spending cuts would take effect so there's some time. but not very much of it. >> by the skin of their teeth. >> yes. >> let's say traders on the desk, we have some mini bargain by the end of next week. what's the market's reaction to that? >> i think it depends on what that mini bargain includes. sol of the defense stocks which actually had up until a couple months ago been hit pretty hard had actually recovered fairly significantly. take a look at a name like lockheed martin. what's going to happen to lockheed martin if a mini deal doesn't help the defense secretarier? they're going to get hit. this is one of the situations where the president is in a position of strength, unfortunately for republicans. when they set this whole thing

up one of the things that the democrats probably wanted was to see bigger cuts in things like defense and not so much in entitlement. and now those things are going to happen automatically, republicans are sort of on their heels a little bit prying to figure out how they could get what they also need which is at least to extend some of these tax cuts. one of the big issues on taxes is also am tmt. they need to resolve the problem with amt. forget about everything else. that is a crisis. >> and i think the short-term reaction is you're going to have a little short covering pop. but i think it gets sold. >> really? you think that we go higher, even on a mini deal? >> i think that -- >> we don't know if we have any real resolution, even in the period which they extend this? >> that's a good point. >> two scenarios, short-term pop, and it gets sold. or they just sell off immediately. to me, because, again, it goes back to the uncertainty thing. you know, there's a lot of sectors, mike just mentioned defense. there's a lot of positioning that we've been talking about on the desk here for months now, and so a lot of people have

vested interest in these things. so to me, i actually think there's a lot of potential risk. but going back to the earlier discussion about earnings growth, that's where i think it really all comes together, especially as this is all going down, with q4 earnings and q1 guidance expected in the next month. >> all right. and, scott, out of chicago, mike makes a really great point in terms of some of the sequester sectors that have managed to recover. if you take a look at the philadelphia defense index it's a couple of points away from a 52-week high even as we teeter on this cliff. >> that's right. up until today everybody seemed very reasonable and it seemed likely we would get a deal done. earlier this week we,000 we knew what the number was going to look like as far as rates going up. it was going to be above 400,000 and below 1 million. today was really, i think, very different. but in many ways the stock market reaction today was probably not bad enough to get these guys to really bargain seriously. we remember when t.a.r.p. was first voted on, it failed. and the dow went down 700

points. and they quickly came back, and they reversed themselves, and you know, the fact that the s&p was only down, you know, less than 2% today on the close, means that there may not be that sort of push to really get a good deal done before the end of the year. now, if they continued to be fairly amenable to getting a reasonable deal done, and they're going to get it done before the end of january, then i think that the s&p probably wallows a little bit lower, i don't think that we -- i think dan is absolutely right. if the market spikes at all i think that's a spike to sell. but i think that the way that they talk is as important as what actually gets done over the next few days. >> yeah. >> he brings up t.a.r.p. that was interesting. we all remember those times. there were issues of systemic risk. >> and people were afraid that they couldn't pull their money out of their -- >> it was a situation. >> the commercial market had completely broken. corporate america was falling apart before our very eyes.

something had to be done. >> here we are with a recovering economy. take a look at the recent data points and they have been largely good. the unemployment rate is going lower. durable goods today versus, consumption income good. all of that -- >> puts the same pressure on it. when you think back to 2011, the european sovereign debt crisis, when there was systemic risk. we had coordinated central bank action to combat that. i don't think our lawmakers feel the same worries right now as they do in those other situations. and remember, 3% for multiyear highs in the s&p. so it's going to take a lot more than a 1400 print in the sbx to make washington really worried about what's going to happen to the markets. >> that's part of the problem. they don't feel like that. however if the s&p had been down 5% i think what we got over the next week would be very different. >> it's going to sound like blasphemy for a lot of viewers to say the market should have sold off so lawmakers would do something but that's exactly what i heard on the trading floor owe new york stock exchange. obviously nobody wants the markets to plunge but they do

want a deal to get done and something that will make these lawmakers come together and compromise on both sides. >> one thing i'm curious about, though, is what possible deal, for anybody who is thinking about buying stocks right here, what possible deal could come out that would say it's a screaming buy on the s&p at 14 times earnings. it's unlikely that anything they're going to say justifies that. >> all right. another break. again awaiting president obama's comments on the fiscal cliff. stay tuned. we'll have him on the other side.