Christina Rexrode

NEW YORK: The government budget debate known as the “fiscal cliff” took the stock market on a roller coaster Thursday. Small developments in the tense standoff yanked stocks back and forth.

Stocks closed lower for the fourth day in a row, sending the unwelcome message that the budget standoff is still far from solved, the economy still far from healed.

The term refers to automatic tax increases and government spending cuts that will kick in next week if Republicans and Democrats can’t reach a budget agreement by Monday night.

Stocks opened by hopping between small gains and losses, pulled up by news about fewer unemployment claims and down by the continuing lack of a budget deal in Washington.

Then, stocks turned decisively downward at mid-morning, unnerved by a report that consumer confidence fell to its lowest level since August, and a warning from the Senate Majority Leader, Democrat Harry Reid, that he feared the government would miss the Monday night budget deadline.

A bright spot of economic news, an increase in sales of new homes, couldn’t distract investors.

The Dow Jones industrial average finished down 18.28 points to 13,096.31. The Standard & Poor’s 500 index fell 1.73 to 1,418.10. The Nasdaq composite index lost 4.25 to 2,985.91.

“This is a matter of a few personalities; it isn’t something where you can analyze spreadsheets to figure out what’s going on,” said David Kelly, chief global strategist at JPMorgan Funds. “There are very few investors on one side or the other who have wanted to make a strong bet on this one.”

Many investors believe that the higher taxes and lower government spending could push the U.S. back into recession.

“This is not small potatoes,” said Hugh Johnson, chairman and chief investment officer of Hugh Johnson Advisors in Albany, N.Y. “We’re not going to miss a recession by much in 2013 as is.”

To be sure, plenty of traders think the “fiscal cliff” is overhyped. Even if the government misses the Monday deadline, the higher taxes and lower government spending would take effect only gradually, and Congress could always repeal them.

Still, that doesn’t mean they’re not worried about the economy in general.

Trading volume was light, with many investors still on Christmas vacation. About 2.8 billion shares traded hands, compared to an average this year of about 3.6 billion. Light volume can make the market more volatile.

Among stocks making big moves:

• Chipmaker Marvell Technology Group dropped more than 3 percent, falling 26 cents to $7.14, after the company lost a patent case brought by Carnegie Mellon University. Marvell said it would fight the $1.2 billion ruling.

• J.C. Penney Co. fell nearly 6 percent, losing $1.23 to $19.52, after rising more than 4 percent the day before. The stock has been volatile as the company tries to remake its image to attract younger shoppers.

• Steinway Musical Instruments fell more than 4 percent, down $1.02 to $21.50, after announcing that it doesn’t plan to seek buyers.