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Stocks decline as concern over budget debate erases rally

Stock prices moved lower again on Tuesday as investors awaited several key economic reports.

The Dow Jones Industrial Average fell 58.90 points to 12,756.18, the fourth decline in the past five sessions. The Nasdaq Composite Index dropped 20.37 points to 2,883.89, and the S&P 500 Stock Index lost 5.50 points to 1,374.53.

The latest reading on inflation is due on Wednesday with the release of the producer price index for October. Also scheduled is the latest report on retail sales.

Gold fell $6.10 to $1,724.80 an ounce while oil was down 19 cents to $85.38 a barrel.

Microsoft Corp. (Nasdaq: MSFT) slipped 3.2 percent after saying its Windows president is departing. AK Steel Holding Corp. (NYSE: AKS) tumbled 18 percent as it forecast a wider-than-anticipated fourth-quarter loss with a decline in prices for the last three months of the year. Home Depot Inc. (NYSE: HD), the largest U.S. home improvement retailer, rallied 3.6 percent after profit beat estimates.

“The stock market is going to be captive to Washington for the time being,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. “The market would like to go up a little bit from here after it has been beaten down, but it’s going to be hard-pressed to sustain a rallying state until we have resolution on the fiscal cliff.”

If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January. Obama invited the top Democratic and Republican leaders to the White House this week to begin talks on a plan to avert the "fiscal cliff."

Obama met with labor leaders Tuesday and will meet with business executives, such as David Cote of Honeywell International Inc. (NYSE: HON), Alan Mulally of Ford Motor Co. (NYSE: F), and Kenneth Chenault of American Express Co. (NYSE: AXP), Wednesday. He’s trying to build support for extending middle-class tax cuts now and designing a balanced approach that relies on spending cuts and tax increases that would require immediate concessions from Republicans.

Cisco Systems Inc. (Nasdaq: CSCO) jumped 6.9 percent to $18.02. After the market close, the biggest maker of computer networking equipment reported a quarterly profit that exceeded analysts’ estimates as price reductions helped spur sales and cost cuts kept margins intact.

AK Steel fell 18 percent to $4.50. The supplier of the metal to U.S. automotive and construction customers said average steel selling prices will be down 5 percent compared with the third quarter in part because of worsening global business conditions. Lower raw-material costs won’t fully make up for the decline in prices, it said.

Weatherford International Ltd. (NYSE: WFT) lost 16 percent to $9.15. The world’s fourth-largest oilfield-services provider reported third-quarter revenue of $3.82 billion, less than the $3.9 billion average of 24 estimates compiled by Bloomberg.

Big Lots Inc. (NYSE: BIG) slumped 5 percent, the biggest decline in the S&P 500, to $27.48. The discount chain was cut to "sell" from "hold" by Deutsche Bank (NYSE: DB) analyst Charles Grom. The Columbus, Ohio-based company’s increasing use of promotions and “lackluster” store checks raise concern that margins will become challenged, New York-based Grom wrote in a note.

Xerox Corp. (NYSE: XRX) gained 1.4 percent to $6.42 after it boosted its quarterly dividend by 35 percent to 5.75 cents a share. The company also increased its share buyback plan by $1 billion and gave a fourth-quarter profit forecast that missed analysts’ estimates. The company is moving to become a services-led business amid declining printing revenue.

Bloomberg News contributed to this report.

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New York Stock Exchange: nyse.com
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