Stocks down on fiscal warning

NEW YORK – Stocks slumped on Wall Street Tuesday after Senate Majority Leader Harry Reid said he was frustrated by the lack of progress in talks over the U.S. budget impasse in Washington.

The Dow Jones industrial average closed down 89.24 points to 12,878.13. The Dow and other indexes had been moving between small gains and losses for most of the day, then turned lower after Reid’s comments in the early afternoon.

“We have to get away from the happy talk and start talking about specific things,” Reid told reporters in televised comments.

The Standard & Poor’s 500 lost 7.35 points to 1,398.94 and the Nasdaq composite index lost 8.99 points to 2,967.79.

Worries about the budget talks have been hanging over the stock market for weeks. Stocks slumped immediately after the Nov. 6 election over concerns that politicians would be unable to reach a deal to trim the deficit before a Jan. 1 deadline.

If that deadline isn’t met, under current law a series of sharp tax increases and spending cuts will come into effect. Economists have warned that the measures could push the economy back into a recession. That deadline has come to be known as the “fiscal cliff.”

“The markets are getting whipped around, rather sharply, on headlines,” said Sal Arnuk, co-founder at Themis Trading. “For example, Harry Reid feeling we’re not making enough progress on the fiscal cliff.”