Stocks slip; weak Citi results dampen optimism over DC budget deal

stocks

JeeYeon Park
CNBC

30 minutes ago

Stocks slipped at the opening on Tuesday, as weak earnings from Citigroup dampened earlier enthusiasm that a budget deal was c;lose in Washington.

The Dow Jones Industrial Average was 47 points down in early morning trading.

The S&P 500 and the Nasdaq also slipped into the red. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 16.

Citigroup's reported a dip in adjusted profit of $1.02 a share, about four cents lower than the same period in 2012, and a penny off analyst estimates.

"Markets will be closely watching the momentum in the mortgage businesses, particularly after the slowdown in refinancing volumes and cost cuts reported in the JPM (JPMorgan Chase) and Wells Fargo results late last week," said Deutsche Bank analysts Jim Reid and Anthony Ip in a research note.

Senate majority leader Harry Reid ended talks with his Republican counterpart, Mitch McConnell, late on Monday, and said a short-term funding deal could be announced on Tuesday. The deal would end the government shutdown and raise the debt ceiling by just enough to cover the nation's borrowing needs past year-end.

(Read more: US senators hint at possible fiscal deal on Tuesday)

House Majority Leader Eric Cantor said that Republican lawmakers will hold a closed-door meeting on Tuesday "to discuss a way forward, so stayed tuned".

However, Daiwa Capital Market's Chris Scicluna forecast that no deal would be struck this week.

"While certain elements of possible solutions to the U.S.fiscal impasse continue to be mooted — for example, with talk of Senate Democrats bringing forward a bill this week that would facilitate a raise in the debt ceiling; a Republican senator floating a plan for a grand bargain involving new spending cuts and tax reforms; and Obama indicating his willingness to kick the can down the road again with a short-term increase in the debt ceiling — political intransigence remains the main theme in the U.S.," he said in a research note.

On the economic front, the pace of growth in New York state's manufacturing sector slipped in October to its slowest since May, according to the New York Fed's "Empire State" general business conditions index.

New York Fed President Dudley was scheduled to speak about monetary policy and Chairman Ben Bernanke was speaking at the Mexico central bank.

(Read more:Companies worry about 'stepping on a bomb')

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