NEW YORK – Stocks look set for another day of being tethered by "fiscal cliff" concerns, as an impending debate in Congress over solving the nation's budget problems keeps investors from making aggressive bets.
Equities have been pressured in recent sessions by worries over the cliff - a series of budget cuts and tax hikes that begin to take effect in the new year. Market participants worry that if no deal is reached to avoid going over the cliff, the economy could fall back into recession.
Concerns over the fiscal discussions contributed to the S&P's losses last week, the worst week for the index since June. On Monday, the index staged a modest rebound but only ended up 0.1 percent, off its highs of the session.
"Stocks will be stuck where they are until we get some kind of resolution on this, and if we don't get something done, people will be even more disenchanted with equities than they are now," said Art Hogan, managing director of Lazard Capital Markets in New York.
U.S. lawmakers return to the capital Tuesday with a seven-week deadline to reach agreement over the cliff, and while most analysts expect some kind of deal will be forged, concerns remain. Barclays on Tuesday cut its year-end target for the S&P 500 to 1,325 from 1,395, saying there was "little basis to believe a grand compromise is in the offing."
Home improvement retailer Home Depot Inc rose 1.9 percent to $63.40 in premarket trading after the Dow component reported earnings that beat expectations and raised its outlook.
"Home Depot has two things going for it - an improvement in the housing sector and the rebuilding efforts after Hurricane Sandy," Hogan said. "That's a backdrop where the company is very well positioned."
S&P 500 futures fell 7.9 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 57 points and Nasdaq 100 futures fell 18 points.
The S&P index hovered around its 200-day moving average after last week, closing below the level for the first time in five months. An extended run below it could signal further losses ahead.
The S&P 500 is still up about 10 percent for 2012, despite losses in recent weeks. The Nasdaq has fallen for five straight weeks.
In earnings news, AK Steel Holding Corp shares fell 11 percent to $4.88 in trading before the bell after forecasting a fourth-quarter loss, while Michael Kors Holdings slumped 0.9 percent to $50.15 despite raising its outlook.
Cisco Systems and TJX Companies are also on tap to report. With 90 percent of S&P 500 companies having reported, 63 percent have beaten expectations.
The executive most widely tipped to be the next chief executive of Microsoft Corp , Steven Sinofsky, has left the world's largest software maker barely two weeks after launching the flagship Windows 8, as CEO Steve Ballmer moved to tighten his grip on the company. Shares of the Dow component fell 3.5 percent to $27 before the bell.
European shares <.FTEU3> fell 0.4 percent as Greece's international lenders gave the country more time to fix its budget, though they didn't disburse the aid Greece had hoped to use to refinance 5 billion euros of its debt pile by Friday.
U.S. stocks closed little changed Monday, with investors limiting bets ahead of the fiscal cliff negotiations. Volume was light, with the U.S. bond market and government offices closed for Veterans Day.
(Editing by Bernadette Baum)