Stocks closed lower in trading on the Tel Aviv Stock Exchange on Thursday. The benchmark Tel Aviv-25 index declined by 0.88% for the day, closing at 1,210.62 points while the broader Tel Aviv-100 index sank by 0.92% to 1,074.25.

Trading here bucked the trend in New York the day before. Wall Street began the new year Wednesday with a rally and its best performance in more than a year, sparked by a last-minute deal in Washington to avert a fiscal cliff of automatic massive tax hikes and spending cuts that, in the worst-case scenario, would have hurt the country's economic growth.

Back in Tel Aviv, the Banks-5 index declined by 0.7% Thursday while the Real Estate-15 was off by over 0.6%. The Oil and Gas index, which the day before had led the gains, slumped Thursday by 1.4%.

But for the week, trading was on the upside. The Tel Aviv-25 rose by 2.2% for the week and 9.2% for the entire year 2012. For the year as a whole, the Tel Aviv-100 rose by 7.2%.

Among the standouts for negative reasons in Thursday's trading was chip maker Mellanox Technologies, whose stock plummeted by more than 17% for the day after the company released an earnings warning in connection with its fourth-quarter 2012 results. It cut its revenue projections for the quarter to the $119 million to $121 million range, which was 18% less than an earlier forecast.

"The reason for the drop in revenues is low demand and a new macro environment and in addition, a technical problem with the company's leading product, which brings in 50% of its turnover," said Yossi Efrati, the manager of the investment department at Hachshara Insurance. "The suggestion at this stage is that getting into the stock is not recommended, despite declines of about 20% since the profit warning was released."

For his part, however, Yaniv Pagot, chief strategist at the Ayalon group, says Mellanox should not be written off: "It's a company with excellent technological fundamentals operating in a growing market with the growing need to transfer large volumes of data throughout an organization."

Following the sharp declines in the company's stock, Mellanox co-founder and CEO Eyal Waldman told TheMarker that the new earnings outlook is the result of the deferral of a $20 million contract with one of the company' customers, as well as technical problems with its leading 56 gigabit fourteen data rate-FDR-product. He said the problem will be addressed and will not affect the company's performance in the future.

And when it comes to rumors in recent months involving the company over short sales and profit warnings, Waldman said: "No information has been leaked from our side, and the moment there is information that is important to investors, we report it in the accepted manner."

Among other notable declines in trading on Thursday were Allot Communications, which lost 10.4% of its value; DS Apex, whose stock dropped by 4.1%; and Clal Biotechnology Industries, which declined by 3.7%. On the positive side, dual-traded Nice Systems and Ceragon Networks each gained 3.4%, while Perrigo rose by 2.7% on the day.

In other capital market news, Bank Leumi began negotiations on Wednesday to sell its 9.8% stake in Israel's largest insurance firm, Migdal. On Thursday morning the bank completed the sale of about half of its stake at a price of NIS 5.72 per share, or about 2.25% less than its market price in the morning. Nevertheless, the bank's selling price was considered high in that generally under such circumstances stocks sell to institutional investors at 2.5% less than the market price. Migdal stock closed on Thursday at NIS 5.70.

In the energy sector, Israel Opportunity Energy Resources notified the exchange on Wednesday that it has found significant quantities of natural gas at its Afrodite 2 drilling site, which is located in the offshore Ishai exploration license area. For the time being, the company said it has no plans to conduct test drilling over possibly producing gas there.

With reporting by Reuters.