Updated from 11:50 a.m. EST
Update: A modest sell-off in stocks picked up steam Tuesday afternoon after Sen. Majority Leader Harry Reid (D-NEV.) said he was "disappointed" with the "little progress" being made in negotiations to avoid the fiscal cliff.
"We only have a couple weeks to get something done so we have to get away from the "happy talk" and do "specific things," Reid said, according to wire service reports.
The Dow fell about 60 points in immediate reaction and was recently down 0.6% to 12,891, closed down 0.7% to 12,878, just off its lows of the session; meanwhile, the S&P 500 shed 0.5% to close below the psychologically important 1400 level.
Earlier: Stocks were modestly lower Tuesday despite potential positive catalysts such as the latest Greek bailout, a better-than-expected durable goods report, a spike in consumer confidence and another gain in the Case-Shiller Home Price Index, which hit its highest level since October 2010.
One reason for the lack of enthusiasm: Rising skepticism about prospects for a deal to resolve the so-called fiscal cliff.
On Monday, White House Press Secretary Jay Carney said Social Security reform should be on a "separate track" from the fiscal cliff discussion, suggesting Democratic opposition to entitlement reform.
"We should address the drivers of the deficit and Social Security currently is not a driver of the deficit," Carney told reporters.
In addition, President Obama has threatened to veto any deal that does not raise taxes on the top 2% of income earners, which puts him squarely at odds with House Republicans.
"We were not re-elected to raise taxes or increase marginal rates," House Majority Leader Eric Cantor (R-VA) said on MSNBC Monday.
Meanwhile, President Obama is resuming his public campaign on the issue this week, planning to meet with small business owners on Tuesday and another group of CEOs on Wednesday before traveling to a manufacturing facility of toy-maker The Rodon Group on Friday.
"The president will travel to Montgomery County, Pennsylvania, to continue making the public case for action by visiting a business that depends on middle class consumers during the holiday season, and could be impacted if taxes go up on 98 percent of Americans at the end of the year," a White House official tells Reuters.
With some 35 days to go before year-end, there's still time to get a deal done and this may just be political posturing. But it's fair to say that the most recent movement on the fiscal cliff issue has seen the two sides moving farther apart. And given the recent history of votes on TARP in 2008 and the debt ceiling in 2011, I'm hard-pressed to see why people think there's going to be a sudden outbreak of rationality and harmony in Washington D.C.