Stock gains fade as Fed warns of market strains

NEW YORK - A late-afternoon slide pulled stock indexes lower after the Federal Reserve held off on any new steps to boost the economy. The Fed cautioned that strains in global financial markets still posed a danger, a nod to Europe's debt crisis.

The Dow Jones industrial average fell 66.45 points, or 0.55 percent, to close at 11,954.94. The Dow dropped more than 70 points in the last hour of trading and had risen as high as 126 points earlier Tuesday after two strong auctions of European debt.

The Standard & Poor's 500 index fell 10.74 points, or 0.87 percent, to 1,225.73. The Nasdaq composite fell 32.99 points, or 1.26 percent, to 2,579.27.

Urban Outfitters jumped 5.3 percent, the most in the S&P 500 index, after the retailer said its sales were rising faster than analysts were expecting. The Philadelphia-based company owns Urban Outfitters stores, Anthropologie, and Free People.

The Federal Reserve portrayed the U.S. economy as slightly healthier but cautioned that it remained vulnerable to the European debt crisis. "Strains in global financial markets continue to pose significant downside risks to the economic outlook," the Fed said. Stock indexes turned lower after the Fed released its policy statement at 2:15 p.m.

Stocks had been higher for most of the day after the Spanish government was able to sell short-term debt at much lower interest rates compared with a month ago, a signal that markets are becoming less fearful about the government's ability to repay its debt.

The Commerce Department reported Tuesday that retail sales rose for the sixth straight month in November. Sales increased just 0.2 percent, below what analysts had expected. But the government also revised the previous month's slightly higher.

Consumer discretionary stocks fell more than the rest of the market. Electronics retailer Best Buy plunged 15 percent. The company said its third-quarter income sank 29 percent as it cut prices on tablets and TVs to drive sales and traffic during the holiday season.

Utility stocks, traditionally a play for safety, were the only industry group in the S&P 500 that rose. The group has gained 10 percent this year, far better than any other industry. Financial stocks have fared the worst, 21 percent.

The euro sank 1 percent against the dollar, putting the European currency at its lowest level since January.

The Vix, a measure of stock-market volatility, fell to 25 and has dropped 8 percent so far this month.

Pfizer Inc. gained 1.8 percent, the most of the 30 companies in the Dow. The drugmaker said it planned to buy back up to $10 billion of its stock.

Sprint Nextel Corp. rose less than 1 percent as it appeared its rival AT&T Inc. would be unable to pull off an acquisition of T-Mobile USA.