U.S. stocks drifted lower in uneven trading Tuesday as fears about the “fiscal cliff” and Greece tipped major indexes between gains and losses. A surge in Home Depot's stock prevented a much-steeper drop for the Dow Jones industrial average.
The Dow was down six points at 12,808 as of 3:15 p.m. Eastern time. It would have been far lower without support from Home Depot, whose stock jumped 4 percent after the big-box retailer beat expectations for its fiscal third-quarter earnings. Home Depot is benefiting from the gradual housing recovery and rebuilding efforts after Superstorm Sandy. Home Depot rose $2.37 to $63.53.
Stocks had opened lower after European leaders postponed the latest aid package for Greece. The Dow turned positive in the first hour of trading and rose solidly through the morning, gaining as much as 83 points.
By late afternoon, the index was nearly flat. The Standard & Poor's 500 index fell a fraction to 1,370. The Nasdaq composite index lost 10 points to $2,894.
Investors are trading against the backdrop of the “fiscal cliff,” a set of U.S. government spending cuts and tax increases that will take effect automatically at the beginning of next year unless U.S. leaders reach a compromise before then.
Worries about the fiscal cliff pushed U.S. stocks to one of their worst weekly losses of the year last week after voters re-elected President Barack Obama and a deeply divided Congress. Obama was set to meet Tuesday with labor leaders and others who advocate higher taxes on the wealthy and want to protect health benefits for seniors and other government programs. Obama will meet with business leaders Wednesday.
“The longer we sit and do nothing” about the nation's fiscal issues, “the more this market is going to oscillate between positive 40 and negative 60, until we know what's going to happen next with all this uncertainty,” said Craig Johnson, senior technical research strategist with Piper Jaffray & Co. in Minneapolis.
Johnson expects the S&P 500 will reach 1,550 in the next six months as investors get over their lingering wooziness from the 2009 bear market and companies get a clearer sense of how government policy on taxes, health care and spending will affect them.
European stock markets had been lower but rose after trading opened in New York. Benchmark indexes in France, Britain and Germany closed modestly higher.
Traders there are concerned because finance ministers postponed $40 billion in desperately needed aid for Greece. The news surprised investors. A day earlier, there was word that leaders had prepared a “positive” report on Greece, making it appear likely that the aid would be released.
“It's a little bit like Groundhog Day,” said Nicholas Colas, chief market strategist at ConvergEx Group, referring to the classic Bill Murray movie whose protagonist must relive the same day over and over. Until there is decisive news from Washington or Brussels, neither of which appear imminent, markets will remain vulnerable to headlines that mean little in the long run, Colas said.
The next major catalysts for a market move, Colas said, will be gauges of spending by consumers on Black Friday, the traditional shopping rush on the day after Thanksgiving.
Greece's neighbors decided to give the country two more years to meet its economic targets. They still disagree with the International Monetary Fund, another key lender, over how to manage the country's debt over the long term. Until lenders reach an accord, they can't release the billions that Greece needs to make upcoming payments.
IMF managing director Christine Lagarde said Greece should reduce its debt burden down to 120 percent of its economic output by 2020, the original target of 2020. But Jean-Claude Juncker, leader of the euro zone's finance ministers, said that the deadline would likely be changed to 2022. The lenders will meet again on Nov. 20.
The yield on the 10-year Treasury note slid to 1.59 percent from 1.64 percent late Friday as demand increased for ultra-safe investments. The U.S. bond market was closed on Monday in observance of the Veterans Day holiday.
Among stocks making big moves:
Microsoft plunged 4 percent after it announced the departure of Steven Sinofsky, who ran its Windows division. The unexpected move comes just weeks after Microsoft launched Windows 8, its first major overhaul in years of the operating system used on most of the world's computers. Microsoft fell $1.08 to $27.14.
Weatherford International dropped 17 percent a day after the oilfield services company reported disappointing third-quarter revenue and said it had uncovered “material weakness in internal controls over financial reporting related to the accounting for a percentage of completion contract in Iraq.” Weatherford took write-downs in the first and second quarters because of them. Its stock fell $1.81 to $9.07.
Apparel chain operator TJX Cos., the parent of TJ Maxx and Marshalls, rose 3 percent after raising its full-year earnings forecast and reporting third-quarter revenue that exceeded analysts' expectations. The stock added $1.13 to $42.09.
US drifting lower; Home Depot boosts Dow average
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US drifting lower; Home Depot boosts Dow average
