Stocks Cap Volatile Trading Session in the Red; S&P Falls for Fifth-Straight Day

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The closely-watched S&P 500 gauge fell for the fifth session in a row as traders reacted to a slew of corporate and economic news and kept a close eye on developments from Europe.

Today's Markets

The Dow Jones Industrial Average fell 53.6 points, or 0.46%, to 11,494, the S&P 500 dipped 4.9 points, or 0.41%, to 1,188 and the Nasdaq Composite slipped 1.9 points, or 0.07%, to 2,521.

Wall Street has embarked on a choppy losing streak, with the major market averages trading at the lowest levels since last month. Indeed, over the past five days the Dow has shed 5%, the S&P has sunk 5.6% and the Nasdaq has tumbled 6.1%.

On the day, conglomerates like General Electric (NYSE:GM) and United Technologies (NYSE:UTX) took some of the heaviest selling on the day. However, consumer-driven stocks like Mattel (NYSE:MAT) posted relatively strong gains.

U.S. Economy in the Spotlight

The Federal Reserve sees significant downside risks to U.S. economic growth and a few members of the FOMC believe conditions warrant additional monetary easing, according to minutes released on Tuesday. The central bank also considered linking interest rates to certain triggers, such as the unemployment rate, or economic growth, the minutes showed.

Some traders believe the Fed will begin another round of asset buying, dubbed QE3, in light of growing economic headwinds and what many see as a inflation data that are within the Fed's comfort zone.

Also on the economic front, a second reading on U.S. gross domestic product showed the economy expanded at an annualized rate of 2% in the third quarter of 2011, weaker than the 2.5% initially projected. Economists were looking for a reading of 2.5%. Still the pace of expansion was dramatically quicker than the 1.3% notched in the second quarter.

There were downward revisions in several key areas, including the very important household, or consumer component.

"This provides a very weak backdrop for the household sector," Peter Newland, an economist at Barclays Capital wrote in a research note.

European Headlines Still Closely Eyed

Market participants continue paying close attention to developments from Europe.  Yields on euro zone sovereign debt continue climbing in countries such as Italy, in the latest sign the continent's debt crisis is beginning to affect sizeable world economies.

The International Monetary Fund said it approved a new credit line to provide emergency assistance to countries in need.  The IMF's statement did not particularly reference European countries, but several countries on that side of the Atlantic have run into trouble making payments on their sovereign debt, requiring bailouts in the past.  It is not immediately clear how large the credit line will be, and if it would have enough firepower to address particularly large economies, such as Italy, if it became necessary.

A top German official reaffirmed on Tuesday that Europe's biggest economy believes the path the euro zone is taking to stave off the debt debacle is appropriate, dimming hopes for joint euro-zone bonds or increased actions by the European Central Bank.

The euro rose 0.12% to $1.351, while European blue chips fell 1.1%. The dollar fell 0.09% against a basket of six world currencies.

Congressional Anxiety

Despite the 12-member congressional Super Committee's inability to craft the legislation, an immediate downgrade of the country's debt rating appears unlikely.  Standard & Poor's and Moody's both re-affirmed their rating on U.S. debt, while Fitch said its reviewing its outlook.  Fitch presently has the most upbeat outlook.

"There is something of a collective sigh of relief following last night's announcement that the U.S. credit rating won't be downgraded," David Jones, chief market strategist at London-based IG Index wrote in an e-mail.

The lack of action by the debt panel will, however, spark a series of potentially painful spending cuts beginning in 2013.  Analysts say the impact on the economy this year and next year will be fairly muted and lawmakers have plenty of time to come up with a solution: "The outcome of the super committee should have very little direct effect on fiscal policies in 2012," Alec Phillips an economist at Goldman Sachs wrote in a note to clients Monday night.

Still, Phillips notes the situation surrounding emergency unemployment benefits and a payroll tax holiday, both of which expire at the end of the year, has become murkier as a result of the deep divides. Both measures directly affect consumers, and therefore can have an impact on the economy going forward, and on equities.

Indeed, Barclay's Newland notes Tuesday's weaker-than-expected report on the U.S. economy "will likely bring uncertainty concerning the extension of the payroll tax cut and extended unemployment benefits into sharper focus for policymakers."

On the corporate front, the Federal Deposit Insurance Corporation said bank profits were the highest in the third quarter of 2011 since the second quarter of 2007. The markets were little moved on the report.

Energy markets were in the green.  The benchmark crude oil contract traded in New York rose $1.12, or 1.1%, to $98.01 a barrel.  Wholesale RBOB gasoline climbed 7 cents, or 2.9%, to $2.56 a gallon.

In metals, gold gained $23.80, or 1.4%, to $1,702 a troy ounce. The benchmark 10-year Treasury note yields 1.945% from 1.950%.

Foreign Markets

European blue chips fell 1.1%, the English FTSE 100 dipped 0.3% to 5,207 and the German DAX slid 1.2% to 5,537.

In Asia, the Japanese Nikkei 225 fell 0.4% to 8,315 and the Chinese Hang Seng ticked higher by 0.14% to 18,252.