Liverpool toppled at Man City's citadel
Liverpool's Uruguayan striker Luis Suarez (R) collides with Manchester City's English goalkeeper Joe Hart in Manchester, northwest England on December 26, 2013
Vincent Kompany and Negredo were City's goalscorers as they responded to Philippe Coutinho's opener to maintain the division's only perfect home record and move their team, ominously, into second place in the table.
Liverpool, meanwhile, fell from first place to fourth, but they trail new leaders Arsenal by only three points.
Having weathered a characteristically strong start to the game from the hosts, Liverpool stunned Manuel Pellegrini's men by taking the lead after 24 minutes.
Moments earlier, Luis Suarez had played Raheem Sterling clean through on goal, only for the winger to be judged offside -- incorrectly, as replays would show.
But eventually the opening goal arrived, thanks to a clever touch from Suarez, who steered Jordan Henderson's pass forward for Sterling.
The young winger rounded goalkeeper Joe Hart before Coutinho took over and calmly planted the ball into the open goal.
This was a true test of City's title pretentions and their invincibility at home, where they had collected every available league point to date this season and, sure enough, within seven minutes, they were level.
Kompany was the source, the big defender rising powerfully to meet a David Silva corner with a precise headed finish that covering Liverpool midfielder Joe Allen could only help into his own net.
Liverpool continued to impress -- far more than fellow title hopefuls Arsenal or Manchester United, who had been brutally swept aside by City at the Etihad Stadium -- but on the stroke of half-time, City went in front.
Liverpool goalkeeper Simon Mignolet was at fault, badly misjudging Negredo's mis-timed shot after the City forward got on the end of a slick counter-attack involving Samir Nasri and Jesus Navas.
It was the culmination of a thrilling first half, which opened with Navas almost heading City into the lead after just five minutes, meeting Aleksandar Kolarov's left-wing cross with a superb effort that scraped the upright.
But Liverpool, and Suarez in particular, are playing with the confidence and verve of a team that even their cautious manager Brendan Rodgers now admits may have a chance of winning the title in 2014.
In the 13th minute, Suarez came close to adding to his recent avalanche of goals when he headed down and just wide from Coutinho's corner.
Before the interval, Liverpool strung together the move of the match involving Sterling and Suarez, who set up Coutinho for a shot that drew a brilliant stop from Hart.
Liverpool opened the second half in similarly ambitious mode as Suarez laid the ball off for Henderson to poke a shot just over from the edge of the penalty area.
And the Uruguay international then showed superb close control to collect Aly Cissokho's lofted through ball and elude his marker before testing Hart at his near post.
Liverpool came close to levelling in a 50th-minute scramble when Hart repelled Sterling's lofted pass with his leg as Henderson almost connected.
Kolarov gifted the rebound to Suarez, who appeared to have turned it into the open net, only for the ball to hit Henderson, who was offside.
Thereafter, an entertaining game did not disappoint. Negredo, with a chip and a header, tested Mignolet, while Henderson worked Hart at the other end with an audacious back-heel.
Suarez sped down the left after 72 minutes and delivered a perfect centre for Sterling, but his team mate's shot from inside the six-yard box cleared the bar by some distance.