--Stocks fall, reversing midday gains
--Europe ticks higher, despite Greek debt solution delay; German economic expectations index declines
--Home Depot leads blue chips on better outlook; Microsoft slides
By Matt Jarzemsky
NEW YORK--U.S. stocks fell to a more than three-month low as concerns about the fiscal cliff and Greece's debt woes outweighed optimism about Home Depot's better-than-expected earnings report.
The Dow Jones Industrial Average added fell 58.90 points, or 0.5%, to 12756.18. The benchmark reversed intraday gains of as much as 83 points to finish at its lowest level since July 25.
The Standard & Poor's 500-stock index slipped 5.50 points, or 0.4%, to 1374.53. Technology and financial shares led the decline. The tech-heavy Nasdaq Composite Index slid 20.37 points, or 0.7%, to end at 2883.89.
Microsoft dropped after news that Steven Sinofsky, head of the software maker's Windows business, is leaving the company.
Home Depot added 3.6% to close at a 12-year high after raising its 2012 earnings forecast on an improving housing market.
"It seemed like the news out of the housing sector had a positive impact on the market, but then ultimately, the set of issues that have had a negative impact of late--namely the fiscal cliff--weighed on stocks into the close," said Cameron Hinds, regional chief investment officer of Wells Fargo Private Bank, which oversees $170 billion.
The so-called fiscal cliff, a combination of mandatory tax increases and spending cuts, is set to take effect at the start of next year if U.S. politicians can't reach a budget deal to avoid it. White House and congressional aides are expected to kick off negotiations Friday, as President Barack Obama meets with congressional leaders.
"These types of days are going to be common," Mr. Hinds said. "Toward the end of the day, the fiscal cliff worries start to take over."
European markets closed higher, alongside the earlier gains in U.S. stocks, with the Stoxx Europe 600 adding 0.4%. International Monetary Fund chief Christine Lagarde and Eurogroup President Jean-Claude Juncker disagreed on how Greece's debt should be tackled, weighing on sentiment.
A measure of German economic expectations for November fell well below economists' expectations, according to the Center for European Economic Research.
On the U.S. economic front, the National Federation of Independent Business said its small-business optimism index for October inched up in September, bucking economists' forecasts for a decline.
The federal budget deficit widened to $120 billion in October, the first month of the government's new fiscal year. The deficit compared with a $98.47 billion shortfall last year and was greater than economists' forecasts for $113 billion.
Asian markets also fell in response to concern about Greece. China's Shanghai Composite shed 1.5% and Japan's Nikkei Stock Average gave up 0.2% to record a seventh consecutive decline.
Crude-oil futures slipped 0.2% to settle at $85.38 a barrel, while gold futures lost 0.4% to settle at $1,724.20 an ounce. The dollar gained slightly against the euro but eased versus the yen.
Elsewhere in the corporate arena, Dick's Sporting Goods gained 4.7% after reporting quarterly results that topped its forecast and raising its current-year profit target.
Nanosphere gained 2% after the medical-test maker said the U.S. Food and Drug Administration cleared it to market a new diagnostic tool.
-Write to Matt Jarzemsky at email@example.com