Stocks fall more than 1% on fiscal cliff fears

NEW YORK (CNNMoney) -- U.S. stocks dropped more than 1% Friday, as investors grow increasingly concerned about the latest signs of gridlock in Washington.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq lost between 1.1% and 1.4% in afternoon trading.

Lawmakers in the House failed to support the so-called "Plan B", a proposal backed by House Speaker John Boehner, late Thursday. The White House had already threatened to veto that plan, saying it would bring only "minimal" changes in projected budget deficits, but its failure underscored the lack of progress on Capitol Hill as the cliff draws nearer.

"Although the principal purpose of the proposed vote was to give additional leverage in his negotiations with President Barack Obama, this was nevertheless something of a set-back and is making markets more nervous," Nomura analyst Alastair Newton wrote in a research note.

In a press conference Friday morning, Boehner discussed the difficulties Republicans and Democrats are having in bridging the divide on taxes.

Adding to the drama on trading desks today, it's "quadruple witching day" -- when investors close out contracts on stock futures and other stock options. Market movements up or down are typically magnified on these four trading days each year.

"Everyone starts to run for the same exits at the same time on quadruple witching days," said Kevin Byrnes, senior analyst at TFS Capital.

But even after Friday's drop, both the S&P and Nasdaq remain up 1% for the week, despite the ongoing gridlock over the fiscal cliff in Washington.

Investors fear automatic tax rises and spending cuts due January 1 in the absence of a fiscal cliff deal could tip the U.S. into recession.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, called the fate of the Plan B proposal "a litmus test for the receptibility of our Congress people to work toward a concrete solution."

On the economic front, data released by the U.S. government Friday morning showed that personal income rose 0.6% in November, while spending increased 0.4% -- both figures came in higher than expected. A report on consumer sentiment from the University of Michigan and Thomson Reuters came in lower than expected.

In company news, shares of Blackberry maker Research in Motion fell more than 15% on Friday, after the company reported Thursday afternoon that sales for the latest quarter fell 47%.

Nokia announced an agreement to settle all patent claims with RIM early Friday, however, financial terms were not disclosed.

Meanwhile, Nike shares rose 4% after the apparel giant posted quarterly earnings Thursday afternoon that beat expectations.

Shares of Walgreens fell 2.8% Friday, after the company's quarterly results showed earnings and sales dropped versus a year ago.

European markets traded lower on the prospect of further uncertainty about the U.S. economy, and oil prices fell. Asian markets also ended weak.

The dollar gained against the Euro but fell against the Yen. Oil prices fell, while gold prices rose. The yield on the 10-year Treasury note fell to 1.74% from 1.8% on Thursday.