* "Fiscal cliff" talks stalled until after holiday
* Equity markets close early, volume light
* Technicals point to "Santa rally"
* Indexes off: Dow 0.4 pct, S&P 0.2 pct, Nasdaq 0.3 pct
(Updates to close)
NEW YORK, Dec 24 (Reuters) - U.S. stocks edged lower on
Monday as caution over the potential for volatility driven by
worries about the U.S. "fiscal cliff" dampened enthusiasm at the
start of a seasonally strong period for equities.
Investors are betting Congress will reach a deal to avert
most of the austerity measures due to come into force at the
start of next year. That has led to the best year for stocks
since the post-financial crisis rebound. But those gains may be
quickly reversed if a deal is not reached soon.
The S&P 500 index posted its biggest drop in more than a
month on Friday as a Republican plan to avoid the cliff - $600
billion in tax hikes and spending cuts that could tip the U.S.
economy into recession - failed to gain traction on Thursday
Sharp moves like that highlight how headlines from
Washington can whipsaw markets, especially during the thinly
traded period over the Christmas holiday.
Still, with the S&P 500 up 0.7 percent in December and on
course for its strongest month since September, some analysts
are predicting that stocks will find their footing during a
market seasonality known as the "Santa Claus rally."
"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," said Ari
Wald, a technical analyst at The PrinceRidge Group.
He noted an all-time high in the NYSE advance-decline line,
which compares advancing and declining stocks, as indication of
strong participation in the rally off November lows.
"Pull-backs are buying opportunities," said Wald. "There has
been really great participation on this move, a lot of small-
and mid-cap stocks behaving well, pushing out to the upside;
we're seeing some good leadership from offensive sectors of the
market as well."
A high ratio of advancing stocks to declining issues shows
there is broad participation across the equity market.
The Santa seasonality covers the last five trading days of
the year and the first two of the new year. Since 1928, the S&P
500 has averaged a gain of 1.8 percent during this period and
risen 79 percent of the time, according to data from
The Dow Jones industrial average dropped 51.76
points, or 0.39 percent, to 13,139.08. The Standard & Poor's 500
Index fell 3.49 points, or 0.24 percent, to 1,426.66. The
Nasdaq Composite Index lost 8.41 points, or 0.28
percent, to 3,012.60.
The S&P 500 is up more than 13 percent for the year, having
recovered nearly all the losses suffered in the wake of the U.S.
election. The yearly gain would be the best since 2009.
Some U.S. lawmakers expressed concern on Sunday the country
would go over the cliff, as some Republicans charged that was
President Barack Obama's goal. Talks are stalled with Obama and
House of Representatives Speaker John Boehner out of Washington
for the holidays.
"It does seem like we are continuing through the same drift
of the same thing we've had the past couple of weeks - 'cliff'
talk," said Nick Scheumann, wealth partner at Hefty Wealth
Partners in Auburn, Indiana.
"You can't trade on what you don't know and we truly don't
know what they are going to do," he said.
Congress is expected to return to Washington next Thursday
as President Barack Obama returns from a trip to Hawaii. As the
deadline draws closer, a 'stop-gap' deal appears to be the most
likely outcome of any talks.
Trading volume was muted, with U.S. equity markets closing
at 1 p.m. (1800 GMT) ahead of the Christmas Day holiday on
In addition, a number of European markets operated on a
shortened session, with other markets closed.
U.S. retailers may not see a sales surge from this weekend
as ho-hum discounts and fears about imminent tax hikes and cuts
in government spending give Americans fewer reasons to open
their wallets in the last few days before Christmas.
Aegerion Pharmaceuticals Inc said the U.S. Food and
Drug Administration approved Juxtapid capsules in patients with
homozygous familial hypercholesterolemia, but will conduct a
post-approval study to test long-term safety and efficacy.
Shares fell 1.8 percent to $25.25.
Herbalife Ltd dipped 4.4 percent to $26.06 after the
company said it expects to exceed its previously announced
repurchase authorization guidance and has retained Moelis &
Company as its strategic adviser. The declines put the stock on
track for a ninth straight decline.
Yum Brands Inc advanced 1.8 percent to $65.01 after
Shanghai's food safety authority said the level of antibiotics
and steroids in the company's KFC chicken was within official
(Reporting By Edward Krudy; Editing by Chizu Nomiyama and Dan