U.S. stocks slid on Tuesday in a choppy session, losing ground in the last hour before the close after Senate Majority Leader Harry Reid expressed disappointment that there has been little progress in dealing with the fiscal cliff.
The market was flat for most of the session but fell sharply after Reid's comments, a signal that investors remain skittish about the wrangling in Washington. The CBOE Volatility Index, or VIX, rose on Reid's words.
It may be that the market feels the goodwill before (last week's) Thanksgiving is evolving into more political intransigence, said Quincy Krosby, market strategist at Prudential Financial in Newark.
The clock is ticking on Wall Street, regarding a framework for (political) consensus, she said.
Markets are focused on whether Congress and the White House can agree on ways to avoid some $600 billion in automatic spending cuts and tax increases that are due to kick in early next year.
As budget talks linger, Las Vegas Sands and Supertex added their names to a growing list of companies announcing special dividends aimed at helping investors avoid a possibly higher tax burden next year.
Higher dividend and capital gains taxes are part of the negotiations in Washington and may rise even if a deal is crafted.
Las Vegas Sands jumped 5.3 percent to $46.36. Supertex rose 6.9 percent to $18.
The S&P 500's modest losses on Tuesday marked its worst day in eight sessions - indicating traders are unwilling to sell aggressively as a deal probably would trigger a rally. The benchmark S&P 500 once again closed below 1,400, a key psychological level that it had reclaimed last week as it rose nearly 4 percent.
The VIX shot up 2.7 percent to 15.92 at the close. Between 2 p.m. and 3 p.m. in New York, the VIX was up 3.9 percent.
The Dow Jones industrial average fell 89.24 points, or 0.69 percent, to 12,878.13 at the close. The S&P 500 dropped 7.35 points, or 0.52 percent, to finish at 1,398.94. The Nasdaq Composite lost 8.99 points, or 0.30 percent, to end at 2,967.79.
Dealings in Washington obscured strong economic figures, including an increase in planned business