Stocks close lower after weak retail reports

Wal-Mart, Ross Stores and Limited Brands, the owner of Victoria's Secret, all fell after issuing forecasts that disappointed financial analysts. Wal-Mart fell $2.59, or 3.6 percent, to $68.72.

The Dow Jones industrial average wavered between small gains and losses shortly after the opening bell, then moved lower at midmorning. It closed down 28.57 points at 12,542.38.

The Standard & Poor's 500 index dropped 2.16 points to 1,353.33 and the Nasdaq composite finished 9.87 points lower at 2,836.94.

Stocks have fallen steadily since voters returned President Barack Obama and a divided Congress to power. The Dow has lost 5 percent from Election Day, Nov. 6.

Investors are worried that U.S. leaders may not reach a deal before tax increases and government spending cuts take effect Jan. 1. The impact would total $700 billion for 2013 and could send the country back into recession.

Bill Stone, chief investment strategist at PNC Asset Management Group in Philadelphia, said the bargaining in Washington would likely drag on until next year, weighing on stocks. "It's hard to see the market getting a whole ton of traction until that gets settled."

President Obama will meet with congressional leaders Friday to talk about the budget, but he appeared to suggest Thursday that he would insist on an increase in tax rates for the wealthy.

T. Dale, a portfolio manager at Security Ballew Wealth Management in Jackson, Miss., said that stocks are more likely to fall than rise, partly because of slowing global economic growth and the U.S. budget impasse.

"The market has gotten well ahead of itself," Dale said.

Superstorm Sandy drove the number of people seeking unemployment benefits up to 439,000 last week, the Labor Department reported. Applications for benefits rose 78,000, mostly because a large number were filed in storm-damaged states.