Stocks fell in choppy trading on Thursday, with the S&P 500 on track to fall for a third day, as Wal-Mart Stores Inc reported disappointing results and investors feared the "fiscal cliff" will harm the economy.

Stocks have struggled recently to hold onto even slight gains, such as on Wednesday when they opened higher but ended down more than 1 percent.

Investors worry the economy could slip into recession if no deal is reached in Washington to avoid the fiscal cliff - budget cuts and tax hikes that begin to take effect in the new year. The S&P 500 is off about 2 percent for the week so far.

President Barack Obama, who plans to meet with Republican and Democratic leaders of Congress on Friday, pressed his bargaining position at a news conference Wednesday that the wealthy must pay more in taxes as part of a deal.

"In terms of the market, all eyes now are on the congressional meeting tomorrow with the White House," said Peter Boockvar, managing director at Miller Tabak & Co in New York.

"With a very oversold market and bearishness at the individual investor level at the highest since August 2011, a bounce is due if there is any positive commentary in that meeting," he added.

Despite the recent decline, the S&P 500 is up 7.5 percent so far this year, though at its 2012 peak the benchmark index was up about 17 percent.

Wal-Mart fell 4 percent to $68.50 after reporting third-quarter revenue that missed expectations. The company said economic conditions pressured customers' spending. Target Corp rose 1.5 percent to $62.32 after it reported a profit that beat expectations.

Weekly jobless benefits claims spiked last week, reflecting the impact of superstorm Sandy. The storm also hurt economic activity in the mid-Atlantic states. The Philadelphia Federal Reserve Bank's business activity index for last month fell more than expected, sending stocks lower.

The index is one of the early indicators of a national manufacturing report later from the Institute for Supply Management.

"We're going to somehow have to carve out the business activity in the Northeast of late in order to get an accurate pulse of the state of the rest of the national economy," Boockvar said.

The government also said the cost of living rose by 0.1 percent last month. The report showed the rate of inflation holding steady, which was seen giving the Federal Reserve room to continue its stimulative monetary policy.

The Dow Jones industrial average was down 59.53 points, or 0.47 percent, at 12,511.42. The Standard & Poor's 500 Index was down 6.27 points, or 0.46 percent, at 1,349.22. The Nasdaq Composite Index was down 16.53 points, or 0.58 percent, at 2,830.28.

Both the Dow and Nasdaq ended at their lowest levels since late June on Wednesday, while the S&P 500 is down about 5 percent since election night. Wednesday marked the benchmark index's lowest close since July 25.

NetApp Inc surged 10.7 percent to $30.04 a day after reporting adjusted second-quarter earnings that beat expectations and forecasting a strong current quarter.

Overseas, Israel launched a major offensive against Palestinian militants in Gaza, killing the military commander of Hamas in an air strike and threatening an invasion of the enclave. Egypt recalled its ambassador from Israel in response.

Energy shares rose amid tensions in the Middle East, as any disruption in crude supplies could spark a jump in oil prices. Brent crude rose 1.1 percent while oilfield services company Halliburton Co rose 1.4 percent to $30.35.

(Editing by Kenneth Barry)