NEW YORK (AP) -- A warning from the Federal Reserve chairman about the "fiscal cliff" helped push stocks lower Tuesday.
In a speech to the Economic Club of New York, Chairman Ben Bernanke urged Congress to take action to avoid the steep federal spending cuts and tax increases scheduled to take effect Jan. 1.
Asked in a Q&A session whether the Fed could limit the economic hit posed by the budget-tightening measures, Bernanke said: "If the economy goes off the broad fiscal cliff, I don't think the Fed has the tools to offset that."
The stock market was already slightly lower. The Dow Jones industrial average sank to a loss of 94 points shortly after Bernanke spoke. By late afternoon, it was down 34 points at 12,760.
Energy companies slumped along with the price of oil, and a surprise announcement from Hewlett-Packard weighed on tech stocks.
HP's executives said that a company HP bought for $10 billion last year lied about its finances. CEO Meg Whitman said that there were "serious accounting improprities, disclosure failures and outright misrepresentations" at the company, Autonomy, which makes search engines. She stopped short of alleging fraud.
HP took an $8.8 billion charge in its latest quarter to bring the accounting value of Autonomy in line with its real value.
In the broader stock market, the Standard & Poor's 500 index lost 5 points to 1,382. The Nasdaq composite index, heavy with technology companies, fell 12 points to 2,904.
Energy stocks and the price of crude oil fell after the president of Egypt predicted that Israel's weeklong offensive in the Gaza Strip would end in hours and the Israeli prime minister said Israel would be a "willing partner" to a cease-fire.
Crude oil was down $2.78, more than 3 percent, to $86.50 per barrel. It traded above $89 earlier in the day. Energy stocks in the S&P declined 0.8 percent as a group.
Housing stocks were among the best. The government said that U.S. builders started construction last month on the most homes and apartments since July 2008.
PulteGroup rose 4.3 percent, Lennar 3.7 percent and D.R. Horton 2.5 percent.
On Monday, the Dow soared 207 points. Investors focused on signs over the weekend that congressional Republicans and the White House might be able to reach a deal to avoid the fiscal cliff.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note edged up to 1.65 percent.
Among stocks making headlines:
— Hormel Foods dropped $1.34, or 4 percent, to $29.96 after its earnings and revenue fell below Wall Street expectations. The company said sales of Spam remained strong, and it increased its annual dividend 13 percent, to 68 cents per share.
— Best Buy fell $1.77, or 13 percent, to $11.98, its lowest in more than a decade. The company, which has struggled for years against increased competition from online electronics retailers, turned in another dismal earnings report.
— Krispy Kreme Doughnuts climbed $1.87, or 25 percent, to $9.41 after it forecast earnings for 2013 above what Wall Street was expecting.
— Green Mountain Coffee rose $1.54, or 6 percent, to $28.87 after picking a new CEO, Brian Kelley of Coca-Cola.
— Groupon gained 31 cents, or 10 percent, to $3.42 after a hedge fund, Tiger Global, said it had bought a 10 percent stake in the company.
- Investment & Company Information
- Ben Bernanke