Stocks lost ground in the final minutes of trading after moving higher in the wake of news that the Obama administration will work with Republicans on the tax dispute. Rising worries over sovereign debt concerns in the euro zone kept a check on gains throughout the session.
The Dow Jones Industrial Average fell more than 30 points, after briefly bobbing into positive territory. Earlier the Dow tumbled more than 100 points.
Bank of America, Procter & Gamble and Pfizer led blue-chips lower, while Caterpillar and United Technologies rose.
The S&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 22.
Most key S&P sectors declined, led by technology, health care, and energy. Telecom rose. For the month, the energy sector was up 4.4 percent, and consumer discretionary was up more than 2 percent.
Stocks initally rebounded after President Obama said Treasury Secretary Timothy Geithner and budget director Jack Lew to work with republicans and Democrats to come up with a deal on the Bush-era tax cuts within a couple days.
If no agreement is reached before Congress breaks for the holidays, taxes on all Americans would increase after Jan. 1, a shocker that would increase pressure on Washington to act.
As of late morning, all the major indexes were on track for the worst November performance in two years. For the year, the Dow is up 5.5 percent, the S&P 500 is up nearly 6 percent, and the Nasdaq is up more than 10 percent. The Russell 2000 was the only index in positive territory for the month, up 3.1 percent. The small-cap index was up nearly 16 percent for the year.
Continuing worries in Europe pushed the euro to 10-week lows, as the dollar rose against a basket of currencies. Gold ralliedabove $1,384 an ounce. Oil futures closed higher, rising 3.3 percent for the month to$84.11 a barrel.
European soverign debt issues and geopolitical tensions in Korea have been excuses for stock prices to consolidate ahead of more significant news about the U.S. economy, said Quincy Krosby, market strategist at Prudential Financial.
"The market certainly has reason to pull back a bit," Krosby said. "Now we’ll wait for more domestic U.S. data."
The big news comes on Friday, when the Labor Department releases November data on nonfarm payrolls. Krosby is hoping the figures will show continued increases in the average hourly work week and overtime for "confirmation the economy is gaining traction."
Financial stocks declined amid news Wikileaks founder Julian Assange will be releasing papers documenting unethical behavior at one of the biggest U.S. banks. Assange revealed the news in an interview with Forbes. While he didn't name a specific bank, Assange did say he acquired documents from Bank of America in an interview last year.
Most banks were lower, including Goldman Sachs and Morgan Stanley .
In corporate news, Google was close to a deal to buy online discounter Groupon for $5 billion to $6 billion, according to reports. The deal, which could happen this week, would be Google's largest acquisition.
Ebay shares slipped after Piper Jaffray cut its ratings on the online auction firm to "neutral" from "buy." However, Barclays raised its price target to $29 from $27.
Seagate Technologies slumped a day after the maker of computer disk drives said it was calling off talks with private equity firms to take the company private. RBC, meanwhile, cut the company's price target to $13 to from $15.
Meanwhile, Research In Motion shares jumped after an analyst praised its new operating systemas flexible, portable and likely to be integrated into its smartphones faster than expected. In addition, brokerages Susquehanna and Jefferies raised their price targets to $45 from $38 and $80 from $55 on the BlackBerry maker. Jefferies also lifted its rating on the firm to "buy" from "hold."
Nintendo shares were higher after reporting sales of the Wii were on pace with its record 2009 level, and Microsoft shares were flat despite the success of its Kinnect motion control sensors.
A strong start to the holiday season lifted a handful of retail stocks.
Wal-Mart shares rose despite news Japan will open an investigationin possible insider trading in Seiyu, Wal-Mart's Japanese subsidiary, when the U.S. retailer turned the Japanese retailer into a fully owned unit in 2007.
Lowe's climbed after the home improvement retailer backed its profit and sales estimates for this year, and said it would unveil plans to continue growth.
Nordstrom , Macy's and JC Penney shares all rose. Kohl's and Target were also higher.
However, Best Buy and Gamestop were both lower.
Barnes & Noble sank nearly 10 percent after the bookstore chain reported a weak outlook, and a bigger loss for the year than forecast.
CBS shares advanced after the media giant abruptly gave"The Early Show" a complete makeover, replacing co-hosts Harry Smith and Maggie Rodriguez and installing its current Saturday anchor team of Chris Wragge and Erica Hill.
Merck announced Kenneth Frazier, currently president of the drugmaker, will become chief executive officerwhen CEO Richard Clark retires early next year. Clark will continue as chairman of the board.
Diana Shipping shares jumped more than 5 percent after Goldman Sachs initiated coverage on the dry-bulk shipping firm with a "buy" rating and a $17 price target.
Baldor Electric soared more than 40 percent following news the electric motors maker would be bought by ABB , the Swiss power and automation company.
In Europe, the spread between Italian and German 10-year government bond yields, and between Irish and German 10-year yields, hit a lifetime high for the euro. The market moves proved the recent bailout of Ireland hadn't drawn a line under concerns over Europe's debt situation. European shares ended flat after failing to stop a three-week slide amid the concerns.
Jim O'Neill, chairman of Goldman Sachs Asset Management, told CNBC.com that European policy makers need to act together to stem the debt crisis or risk market pressures forcing a structurally vital country like Italy to need a bailout.
Portugal was also in the spotlight after the country's central bank warned its banks may face an "intolerable risk" if the country fails to consolidate its public finances.
Fears of debt problems were also present in the U.S., where a poll conducted by CNBC and Associated Press revealed that a majority of Americans think taxes will have to be raised and government services will have to be reduced in order to cut the federal deficit.
On the economic front, consumer confidence rose to 54.1 in Novemberfrom 49.9 in October, according to the Conference Board. The November level was the best seen since June, and beat a median reading of 52.6 forecasted by analysts surveyed by Reuters.
And in another positive sign for the U.S. economy, business activity in the Midwest grew more than expected in November. The Institute for Supply Management-Chicago business index rose to 62.5 in November, up from 60.6 in October. Economists had forecast a November reading of 60.0. The employment component of the index rose to 56.3 from 54.6 in October, while new orders rose to 67.2, from 65.0.
But home prices fell 1.5 percent in September, according to the Standard& Poor's/Case-Shiller house price index. Nationally, home prices fell 2 percent from a year earlier. Economists had expected home prices to rise 1.0 percent in September.
Analysts expect U.S. auto sales in November held above 12 million vehicles on an annual basis, a gain of about 10 percent from a year earlier. Sales were boosted by discounts and a slow return of consumer demand, analysts said. Actual figures will be released by the auto companies on Wednesday.
On Tap This Week:
WEDNESDAY: Auto sales, MBA mortgage applications, Challenger job-cut report, ADP employment report, productivity and costs, ISM mfg index, construction spending, oil inventories, Beige Book, Fed vice chair Yellen speaks
THURSDAY: ECB announcement, jobless claims, pending home sales, Philadelphia Fed Pres Plosser speaks, Fed Gov. Duke speaks, chain-store sales; Earnings from Toll Brothers, Del Monte and Kroger
FRIDAY: Employment situation, factory orders, ISM non-mfg index
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