Stocks edged lower at the open on Tuesday as investors awaited the outcome of discussions on a bailout package for Greece from international lenders that would help the country avoid a chaotic default.
Greek Prime Minister Lucas Papademos negotiated through most of the night with lenders from the European Union and International Monetary Fund over more fiscal reforms as trade unions staged a national strike against more cuts.
A Greek government official said the nation is preparing the text of an agreement on a 130-billion euro bailout that must be put to political leaders for approval, suggesting Athens had largely wrapped up talks with lenders.
Markets would love to see some certainty, and we don't have any of that at the moment, said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.
On the equities side, we've come a long way, and we are getting into overbought territory, so most of us are expecting a bit of a pullback or a period of consolidation - the depth of the pullback really depends on Greece and the European debt problems.
A disorderly Greece debt default could lead to increased fiscal problems for weaker members of the euro zone and dampen the U.S. recovery.
European shares fell on the Greece talks and after disappointing results from investment bank UBS AG (UBSN.VX)(UBS.N) and shipbuilder Alfa Laval AB (ALFA.ST). The FTSEurofirst 300 finance/markets/index?symbol=gb%21FTPP>.FTEU3 index of top European shares was down 0.7 percent. .EU
The benchmark S&P index had risen for five straight weeks on the back of improving U.S. economic data, punctuated by the Friday payrolls report, to lift the index up almost 7 percent for the year. A light economic calendar this week has shifted investor focus back to the euro zone.
The Dow Jones industrial average .DJI dropped 38.30 points, or 0.30 percent, to 12,806.83. The Standard & Poor's 500 Index .SPX.INX dropped 4.83 points, or 0.36 percent, to 1,339.50. The Nasdaq Composite Index .IXIC dropped 9.72 points, or 0.33 percent, to 2,892.27.
Coca-Cola Co (KO.N) edged up 0.2 percent to $68.15 after the soft-drink maker reported better-than-expected quarterly results and announced a new cost-savings program.
As earnings season winds down, investors awaited results from companies including Lincoln National Corp (LNC.N) and Walt Disney Co (DIS.N).
Emerson Electric Co (EMR.N) dipped 3.4 percent to $51.54 after it reported lower quarterly sales and earnings as last year's floods in Thailand disrupted supply chains and weak European economies hurt demand.
According to Thomson Reuters data through Tuesday morning, of the 301 companies in the S&P 500 posting results, 60 percent topped expectations, tracking below recent quarters at this point of the reporting season.
UBS predicted more weakness in investment banking after a restructuring of the business failed to prevent an earnings hit from the euro-zone debt crisis and worries about the global economy. Shares dipped 2.5 percent to $14.01 in New York trade.
ArcelorMittal (MT.N)(ISPA.AS) forecast improvement in the first half of 2012 after a weak end to last year, with a clear pick-up in North America but continued concerns about Europe. U.S.-listed shares of the world's largest steelmaker rose 1.8 percent to $21.83.