Wall Street sentiment was mixed overnight as Democrats and Republicans each flexed their muscles, both resisting giving in further to the other side's demands as the year-end deadline to avoid the fiscal cliff approaches rapidly.
US President Barack Obama would veto a tax and spending plan presented by House Speaker John Boehner, but said he remained hopeful of an accord by Christmas. The Republican "Plan B" would extend low tax rates for those who earn less than US$1 million-Obama has shifted to a US$400,000 threshold after starting out at US$250,000.
Republicans in the House could vote tomorrow on their "Plan B". The vote is being seen as a way to bolster Boehner's bargaining position within his own party.
In afternoon trading in New York, the Dow Jones Industrial Average slipped 0.07 per cent, the Standard & Poor's 500 Index fell 0.13. The Nasdaq Composite Index eked out a 0.09 per cent gain.
"Markets continue to be very much focused on fiscal cliff resolution," Ryan Larson, the Chicago-based head of US equity trading at RBC Global Asset Management (US), told Bloomberg News. "The move over the last few days has been supported by optimism that a deal will be reached by year-end. However, so far today we're seeing a bit of caution as Congressional leaders remain at different ends on several key issues."
The latest housing data provided a mixed picture. The number of building applications issued in November climbed to the highest in more than four years, while housing starts dropped to an 861,000 annual rate last month after rising a revised 888,000 in October.
Still, optimism prevailed on the recovery in the real estate industry.
"The trend is definitely up. Housing is going to make a small contribution to economic growth in 2012 and I would expect that home building will continue to improve through 2013," Gus Faucher, senior economist at PNC Financial Services in Pittsburgh, told Reuters.
Shares of General Motors jumped, last up 8 per cent at US$27.53, after the company said it will buy back 200 million of its shares from the US Treasury at US$27.50 a share in a deal expected to close by the end of the year.
Shares of Alcoa suffered, last down 3 per cent, as Moody's Investors Service put the aluminium producer under review for a credit downgrade.
In Europe, the Stoxx 600 Index ended the day with a 0.4 per cent advance from the previous close. National benchmark stock indexes also rose in France, the UK and Germany.
The latest data on German business confidence bolstered the mood on Europe's largest economy. The Ifo institute's business climate index rose to 102.4 in December from 101.4 in November.
That also helped the euro rise to the strongest level against the greenback in eight months. It was last up 0.1 per cent at US$1.3248.