NEW YORK (Reuters) - Stocks were little changed on Tuesday as the market awaited developments in negotiations in Washington to avert a "fiscal cliff" that could push the U.S. economy into recession.
Republicans in Congress proposed steep spending cuts to bring down the budget deficit on Monday but gave no ground on President Barack Obama's call to raise taxes on the wealthiest Americans, and the proposal was quickly dismissed by the White House.
The market has been subject to swings in reaction to the proposals floated so far by politicians. Still, many investors expect the two sides to come up with a deal before the year-end deadline, which could trigger a rally in equities.
"Investors everywhere are focused on what is happening here related to the fiscal cliff and the risk that nothing will happen," said Gail Dudack, Chief Investment Strategist, Dudack Research Group in New York.
"From what I have seen, there is a consensus that something will happen. Maybe if it is not ideal, something will happen."
Differences within the Republican Party over how to engage with the Democrats came to the fore on Tuesday as one senator opposed to raising taxes lashed out at House Speaker and fellow Republican John Boehner for proposing to increase revenue by closing some tax loopholes.
Despite the sudden moves in the market, a measure of investor anxiety has held surprisingly flat.
The CBOE volatility index <.VIX>, a gauge of market anxiety, was at 17 but has not traded above 20 since July following its 2012 high near 28 hit in June. The VIX's 10-day Average True Range, an internal volatility measure, is at its lowest since early 2007.
Obama will meet with U.S. governors at the White House on Tuesday to talk about the fiscal cliff, a $600 billion package of tax hikes and federal spending cuts that would begin January 1.
The president is also expected to talk about the fiscal cliff during an interview scheduled for 12:30 p.m. (1730 GMT) on Bloomberg TV.
The Dow Jones industrial average <.DJI> rose 27.92 points, or 0.22 percent, to 12,993.52. The S&P 500 <.SPX> edged up 0.44 points, or 0.03 percent, to 1,409.90. The Nasdaq Composite <.IXIC> fell 4.44 points, or 0.15 percent, to 2,997.76.
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(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)
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