Kate Gibson

NEW YORK: Stocks dropped on Tuesday after Senate Majority Leader Harry Reid, D-Nev., said little progress has been made in federal budget talks.

The Dow Jones industrial average declined 89.24 points, or 0.7 percent, to end at 12,878.13. Hewlett-Packard Co. was the top decliner in the Dow, with its shares slumping 3 percent.

“The dominant item on the market’s mind continues to be the fiscal cliff,” Brad Sorensen, director of market and sector analysis at the Charles Schwab Center for Financial Research, said of negotiations on Capitol Hill.

The market’s intensified decline came after Reid expressed disappointment to reporters about the negotiations to avert billions in automatic spending cuts and tax increases that are set to start in the new year.

Reid also said he agrees with President Barack Obama that Social Security should not be part of a fiscal-cliff deal.

“The staffers are doing the legwork, while their bosses are trying to find the cameras,” Art Hogan, market strategist at Lazard Capital Markets, said of legislative efforts to reach a deficit-cutting deal.

“The good news is, we’ll build the case for equities while waiting for Washington to have a crisis of common sense,” he said.

The S&P 500 index shed 7.35 points, or 0.5 percent, to close at 1,398.94. The Nasdaq composite index dropped 8.99 points, or 0.3 percent, to end at 2,967.79, snapping a six-session winning streak.

In Europe, finance ministers reduced the rates on loans granted in the first financial rescue of Greece in mid-2010, while approving the next loan installment for the nation in December.

The step did little, however, for the euro, which fell against other currencies, including the U.S. dollar. The euro’s decline “likely reflects selling on the fact, with an agreement long expected and the euro-zone economic outlook still underwhelming,” wrote Nick Bennenbroek of Wells Fargo Bank.

Oil was down 56 cents to $87.18 a barrel.