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Stocks Slide as Fed, ECB Decisions Loom

Stocks closed out another quiet session with modest losses, as investors maintained a wait-and-see approach to the Federal Reserve policy decision tomorrow and the ECB meeting on Thursday.

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The Dow Jones Industrial Average, S&P 500and Nasdaq all finished lower on the day. The Dow lost 64.33 points, or 0.49 percent, to close at 13008.68, while the S&P 500 lost 5.98 points, or 0.43 percent, to close at 1379.33. The Nasdaq lost 6.32 points, or 0.21 percent, to end at 2939.52.

For July, the Dow gained 1 percent, despite the fact that down days far outnumbered up days. The S&P rose 1.3 percent during the month, while the Nasdaq edged up 0.15 percent.

Dow component Pfizer led the blue-chip gainers today, while Home Depot lagged.

The S&P telecom and tech sectors gained, while consumer discretionary and energy stocks fell.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded above 18.5.

Despite more encouraging economic data, investors appeared unwilling to make any big moves ahead of the central bank meetings this week. "After the big rally last week, investors are catching their breath ahead of the Fed, and more importantly, the ECB," Ryan Detrick of Schaeffer's Investment Research said.

While Detrick believes markets could be set up to "sell the news" in the near-term following the Fed and ECB announcements, "the positive market trend is still in place and any pullback should be used as a buying opportunity." Detrick has a year-end target of 1,525 on the S&P 500. (See also:Complacency Is High—Beware Central Bank Letdowns).

Market participants will look for hints of further stimulus measures to spur growth and are hoping the ECB will start buying Italian and Spanish bonds to keep yields down. The ECB's policy decision is due on Thursday, while the Federal Reserve's policy decision is out on Wednesday afternoon. (Read More:Wall Street Now Almost Certain Fed and ECB Will Act).

“We’re not expecting the Fed to do anything dramatic,” Pimco’s Tony Crescenzi said in an interview on CNBC. “But remember, in June when the Fed met it did announce a policy solution – it extended Operation Twist. We expect that the Fed will deliver on quantitative easing, just not yet.”

In a statement that appears aimed at dampening market expectations for actions from the ECB, a Bundesbank source told CNBC, “Monetary policy should strictly focus on its primary mandate to preserve price stability.” Late last week, ECB President Mario Draghiraised market hopes of strong action when he said the bank would do all it could within its mandate to save the euro and suggested that addressing the wide disparity in borrowing rates among some European nations fell within that mandate.

Looking at today's economic reports, consumer confidence, home prices and Chicago area manufacturing data all improved. July consumer confidence jumped to 65.9 after a reading 62.7 in June, while the July Chicago PMI increased to 53.7 from 52.9 in June.

The S&P/Case-Shiller 20-city home price index rose 0.9 percent on a seasonally adjusted basis, topping expectations for a 0.5 percent increase. (Read More:Recent Gains in Home Prices May Not Mean Much—Yet).

June personal incomerose 0.5 percent and consumer spending was unchanged. The Street was expecting personal income to rise 0.2 percent and spending to rise 0.1 percent.

Turning to stock news, Apple rose above $600 per share after a reportfrom research firm Sanford Bernstein suggested the tech giant could be considering a stock split, which would enable the stock to be added to the Dow Jones Industrial Average.

Facebook shares reached another new low as investors punished the stock after last week's earnings report showed a deceleration in user growth and the company issued no guidance.

Drug distributor AmerisourceBergen led the S&P health care sector gainers after it won an $18.5 billion drug contract from pharmacy benefit manager Express Scripts . AmerisourceBergen is replacing Cardinal Health as the Express Scripts supplier.

Dow component Pfizer posted second-quarter earningsof $0.54 per share on revenue of $15.1 billion. Analysts polled by Thomson Reuters forecast earnings per share of $0.54 on revenue of $14.9 billion.

Humana , the managed care company, lowered its 2012 outlook on costs associated with both new and existing Medicare patients.

Upscale leather goods maker Coach paced declines in the consumer discretionary sector after it reported lower-than-expected fourth-quarter sales, hurt by promotion deals it offered North American shoppers.

Anheuser-Busch InBev , the world's largest brewer, fell short of second-quarter earnings expectations, selling less beer and spending more on distribution and marketing new U.S. brands.

U.S. Steel beat Street expectations for the second quarter, but warned third-quarter results would fall because of the global economic slowdown and weaker prices. S&P Capital IQ raised the stock to "buy" from "hold."

Cummins, the engine maker, surpassed analyst estimates for the quarter, as sales in North America offset weakness in China and Brazil. The company’s gross margin was also at a record high in the quarter.

Industrial firm Tyco International reported better than expected third-quarter earningsas sales rose 4%.It also said it is on track to complete its breakup into three separate companies in September.

Coming Up This Week:

WEDNESDAY: Weekly mortgage apps, ADP employment report, PMI manufacturing report, ISM mfg index, construction spending, oil inventories, auto sales, FOMC mtg announcement; Earnings from Comcast, Dollar Thrifty, Marathon Oil, MasterCard, Time Warner, Green Mountain Coffee, Hartford Financial, MetLife, Prudential Financial, Yelp

THURSDAY: Jobless claims, factory orders, chain-store sales; Earnings from GM, Sony, Clorox, Teva Pharmaceuticals, Time Warner Cable, AIG, Kraft, Activision Blizzard, LinkedIn, Sunoco, Opentable, Zipcar

FRIDAY: Employment situation, ISM non-mfg index; Earnings from P&G, Toyota, Beazer Homes, NYSE Euronext, Berkshire Hathaway

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