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News that the White House rejected Republicans' fiscal cliff backup plan weighed on traders' sentiment, denting gains from a big rally earlier in the week.

Today's Markets

As of 3:20 p.m. ET, the Dow Jones Industrial Average fell 65.1 points, or 0.49%, to 13286, the S&P 500 dipped 7.7 points, or 0.53%, to 1439 and the Nasdaq Composite slumped 5.4 points, or 0.18%, to 3049. 

The Dow and S&P 500 both posted their best two-day advance since November during the first part of the week. Progress made on talks to avoid the fiscal cliff -- a painful punch of tax hikes and spending cuts set to hit next year -- helped raise sentiment. 

The upbeat mood faded Wednesday after the White House said President Obama would veto a plan floated by Republicans in the House of Representatives dubbed "Plan B." In a strongly-worded response, White House Communications Director Dan Pfeiffer said "this approach does not meet the test of balance, and the President would veto the legislation in the unlikely event of its passage."

An aid for House Speaker Johh Boehner promptly struck back, calling the response from the White House "bizarre and irrational." Later, Boehner said at a news conference that Obama can "call on the Senate Democrats to pass (Plan B), or he can be responsible for the largest tax increase in American history."

In corporate news, software giant Oracle (ORCL) posted quarterly results that beat estimates on the top and bottom lines. Meanwhile, FedEx (FDX) the global package deliver company that is also seen as an economic bellwether posted results that beat on the bottom line but missed slightly on the top line. 

General Motors (GM) will buy back 200 million shares of its stock at $27.50 a share from the U.S. Treasury Department in a $5.5 billion deal expected to close by the end of this year. The government plans to sell its remaining 300 million shares over the next 12 to 15 months.

Knight Capital (KCG) chose to pursue a cash and stock merger deal with GETCO that values Knight at $1.4 billion, ending a bidding war for the trading company. As part of the deal, Knight shareholders will have the right to receive $3.75 a share in cash or one share in the new company.

On the economic front, the Commerce Department said U.S. housing starts fell 3% in November from October to an 861,000-unit rate, missing economists' estimates of an 873,000-unit rate. Permits to build new homes jumped 3.6% to an 899,000-unit rate, topping estimates of an 875,000-unit rate and marking the fastest pace since July 2008.

The real estate market has generally been showing signs of recovery in recent months, but economists say it will be a slow and choppy ride. 

A closely watched survey on German business sentiment from the Ifo Institute rose to 102.4 in December from 101.4 the month prior, suggesting Europe's biggest economy may be shaking off headwinds from the eurozone's debt crisis. 

Energy futures rallied. The benchmark crude contract jumped $1.58, or 1.8%, to $89.51 a barrel. Wholesale New York Harbor gasoline zipped higher by 1.9% to $2.743 a gallon. In metals, gold was lower by $3, or 0.18%, to $1,668 a troy ounce. 

Foreign Markets

The Euro Stoxx 50 climbed 0.42% to 2655, the English FTSE 100 gained 0.43% to 5962 and the German DAX edged up by 0.19% to 7669. 

In Asia, the Japanese Nikkei 225 surged 2.4% to 10160 and the Chinese Hang Seng edged up by 0.57% to 22623.

 

Rich Edson contributed reporting from Washington, D.C. 

Follow Adam Samson on Twitter @adamsamson.