NEW YORK (Reuters) - Stock index futures declined on Monday, indicating the S&P 500 would extend losses after suffering its worst drop since mid-November on continued worry legislators will be unable to reach a deal to avert the "fiscal cliff."
The benchmark S&P index <.SPX> declined 0.9 percent on Friday, its biggest percentage drop since November 14, 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 sufficient support on Thursday night.
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.
"Despite the selloff on Friday, the market finished the week off on an up note and this morning we are seeing a downside follow through as investors are being rational to the possibility we do not have a cliff deal by year-end," said Andre Bakhos, director of market analytics at Lek Securities in New York.
"Today is a short session and with people away there is a possibility we could see exaggerated moves."
Congress is expected to return to Washington next Thursday as 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.
S&P 500 futures fell 4.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 34 points, and Nasdaq 100 futures declined 11.5 points.
Trading volumes are expected to be muted, with U.S. equity markets scheduled to close at 1 p.m. (1800 GMT) ahead of the Christmas holiday on Tuesday.
In addition, a number of European markets will operate on a shortened session, with other markets closed entirely.
U.S. retailers may not see a sales surge 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.
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European shares were broadly steady, consolidating sharp gains made in the past five weeks, with volumes set to be thin for the traditionally quiet half session ahead of the Christmas break. <.EU>
Asian shares steadied in quiet pre-holiday trade from a slump late last week, with prices capped by nervousness about the risk of the United States failing to avert a fiscal crisis.
(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama)
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