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.