US stocks fell for a second day as concern about progress in Washington budget negotiations overshadowed a European agreement on Greece aid and a better- than-forecast report on durable goods.
The Standard & Poor's 500 Index fell 0.5 per cent to 1,399.10 at 4 p.m. in New York.
"The market remains fixated on what's going on in Washington," Frederic Dickson, who helps oversee about $US32 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. "The lack of progress in resolving major fiscal cliff issues is topic A and trumping any kind of positive news whether it's coming out of Europe or positive economic reports."
US equities extended declines after Senator Majority Leader Harry Reid said "little progress" has been made in talks to avert the so-called fiscal cliff. "We only have a couple weeks to get something done so we have to get away from the happy talk" and do "specific things," he told reporters.
The S&P 500 has slipped 2.1 per cent since Nov. 6 as President Barack Obama's re-election set up a showdown with the Republican-controlled House of Representatives over the budget. Congress returned from the Thanksgiving recess this week, seeking a budget deal to avoid $US607 billion of automatic tax increases and spending cuts from kicking in next year.
While Republicans favor raising federal tax revenue by limiting deductions, Democrats have pushed for higher rates on upper-income earners. The Congressional Budget Office has said a failure to avoid the fiscal cliff could lead to a recession and a jobless rate of about 9 per cent, compared with the October rate of 7.9 per cent.
"It had looked like Washington lawmakers had kissed and made up after the presidential election and while that might still be so, some are reading Mr. Reid's comments as more work needing to be done," Larry Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston, wrote in an e-mail. "It's getting close to the witching hour now so not the best thing to hear."
In Europe, finance ministers cut the rates on loans made under the first bailout of Greece in May 2010. They also suspended interest payments for a decade on lending agreed under the country's second bailout. The ministers outlined a plan for the Mediterranean nation to buy back its debt at distressed rates. They authorized Greece to receive a 34.4 billion-euro ($US44.6 billion) loan installment in December.
"All initiatives decided upon today will bring Greece's public debt clearly back on a sustainable path," Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels after chairing a 13-hour meeting that ended early today.
Demand for goods such as machinery and electronics climbed in October by the most in five months. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, rose 1.7 per cent last month, the Commerce Department reported in Washington. Orders for all durable goods were little changed, beating the median forecast of economists surveyed by Bloomberg that projected a 0.7 per cent drop.
Another report showed consumer confidence rose in November to the highest level in more than four years. Home prices climbed in the year ended in September by the most since July 2010.
"With the fiscal cliff, there's going to be good news, bad news, good news, bad news before it's all settled," Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $US85 billion, said in a telephone interview. "You had some favorable news on the European situation with Greece, durable goods orders were a little better-than-expected, and the market didn't respond to any of that."
S&P 500 futures pared earlier gains after Federal Reserve Bank of Dallas President Richard Fisher said he advocates limits on quantitative easing. Fisher said in a speech today in Berlin that the US central bank could "pursue a different course" and announce "a limit as to how much we are going to acquire of Treasuries and mortgage-backed securities, say up to a limit of X, up to a point where our balance sheet reaches that."
He said that could be done "at this next meeting, which would be my preference."