Stocks closed near session lows in volatile trading Tuesday, with the S&P 500 breaking below 1,400, as ongoing worries over the "fiscal cliff" trumped a batch of positive economic reports and optimism over the Greek deal.
Stocks took another leg lower in the afternoon after Senate Majority Leader Harry Reid said he is disappointed with the little progress made in the recent debt talks. Reid's comments echoed Senator Dick Durbin's cautious statement over the weekend.
The Dow Jones Industrial Average dropped 89.24 points, or 0.69 percent, to end at 12,878.13, dragged by Hewlett-Packard. Intel led the blue-chip gainers.
The S&P 500 declined 7.35 points, or 0.52 percent, to finish at 1,398.94. And the Nasdaq fell 8.99 points, or 0.30 percent, to close at 2,967.79.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded above 15.
Most key S&P sectors finished in negative territory, led by banks and energy. Utilities closed higher for a second-straight session.
“Consumer and investors alike are concerned about the fiscal cliff,” said David Kudla, CEO and chief investment strategist at Mainstay Capital Management. “Market is going to suffer from headline risk until we get to that deal.”
Investors were focused on politicians’ efforts to resolve the $600 billion “fiscal cliff” of automatic tax hikes and spending cuts due to hit the U.S. economy at the end of the year. Negotiations are expected to resume this week as policymakers return to Washington from the Thanksgiving holiday.
European shares were higher after Greece's international creditors secured a deal to reduce the troubled nation's debt by 40 billion euros ($51.9 billion) and changed the debt target for the country to 124 percent of gross domestic product (GDP) by 2020, from 120 percent previously.
“Nothing else matters—everyone is focused on the resolution of the fiscal cliff,” said John Fox, co-manager of the FAM Value Fund. “Stocks will most likely muddle through until we come to some solution.”
ConAgra agreed to acquire Ralcorp in a deal worth nearly $5 billion to become the biggest private label food company in North America.
Facebook rose to hit a four-month high after Nomura boosted its price target on the social-networking giant to $32 from $27 a share.
Yelp gained after Cantor Fitzgerald raised its rating on the business review site to "buy."
In a quiet day for earnings, home security firm ADT posted better-than-expected earnings and said its board approved a $2 billion share repurchasing program over three years.
Green Mountain and Analog Devices are scheduled to post earnings after the closing bell.
Corning rallied after the glass manufacturer said it sees stronger-than-expected fourth-quarter LCD glass volume and full-year sales of its gorilla glass approaching $1 billion, thanks to robust demand for LCD televisions and other consumer electronic devices in North America and China.
Dollar General will replace Cooper Industries to join the S&P 500 index after the close of trading Friday. The move comes as a result of Eaton's plans to acquire Cooper.
On the economic front, home prices rose for the sixth-consecutive month in September, according to the S&P/Case-Shiller home price index. Meanwhile, consumer confidence rose to its highest level in 4-1/2 years in November, according to the Conference Board.
And durable goods were unchanged in October, according to the Commerce Department.
The government auctioned $35 billion in 2-year notes at a high yield of 0.27 percent. The bid-to-cover was 4.07.