By Nikolaj Gammeltoft and Adria Cimino
NEW YORK - U.S. stocks dropped as concern mounted that the so-called fiscal cliff will harm the economy and as euro-area finance ministers and the International Monetary Fund failed to agree on how Greece will repay its debt.
Microsoft Corp. slipped 3.7 percent after saying its Windows president is departing. AK Steel Holding Corp. slid 11 percent as it forecast a wider-than-expected fourth-quarter loss with a decline in prices for the last three months of the year. Home Depot Inc., the largest U.S. home improvement retailer, gained 3.4 percent as its profit beat estimates.
The Standard & Poor’s 500 Index decreased 0.4 percent to 1,374.04 at 9:39 a.m. in New York. The Dow Jones Industrial Average dropped 37.17 points, or 0.3 percent, to 12,777.91. Trading in S&P 500 companies was 7.1 percent above the 30-day average at this time of day.
“The psychology is very negative and people are looking for reasons to take risk off,” Michael Holland, who oversees more than $4 billion in assets as chairman of New York-based Holland & Co., said in a phone interview. “This morning the reasons du jour started out with Europe and the kerfuffle over Greece and then you have the fiscal cliff.”
Most U.S. stocks fell yesterday, following the S&P 500’s biggest weekly retreat since June, as President Barack Obama’s re-election set up a budget showdown with the Republican- controlled House of Representatives. If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January.
Obama invited the top Democratic and Republican leaders to the White House this week to begin talks on a plan to avert the fiscal cliff. Obama is meeting with labor leaders today and business executives such as David Cote of Honeywell International Inc., Alan Mulally of Ford Motor Co., and Kenneth Chenault of American Express Co. tomorrow.
He’s trying to build support for extending middle-class tax cuts now and designing a “balanced” approach that relies on spending cuts and tax increases that would require immediate concessions from Republicans.
“The budget uncertainty is a risk,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “All will depend on Obama’s leadership. The Greek debt problem is a risk that remains. Anything that shows a resolution will take longer weighs on the market. We’re not out of the woods yet.”
The euro-area finance ministers gave Greece two extra years until 2016 to wrestle down its budget deficit to 2 percent of gross domestic product, pledging to plug the resulting financing gaps in order to keep the country in the single currency and prevent a renewed flareup of the debt crisis.