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Pull Back!! Stocks Slipping on Budget Deal, Fed Policy

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NEW YORK (TheStreet) -- Major U.S. stock markets were dropping Wednesday amid growing concern the Federal Reserve will curb its  stimulus program after an apparent political deal on the U.S. budget alleviated concerns about another government shutdown.

The bipartisan budget deal announced late Tuesday -- which still needs approval from the House and Senate -- sets federal agency spending levels at $1.014 trillion for next fiscal year and reduces the chances of a government shutdown. The agreement increases the possibility that the Fed will reduce the size of its $85 billion in monthly bond purchases, a major factor in equities 2013 rally.

  • The Standard & Poor's 500 was falling 0.87% to 1,787.28 while the Dow Jones Industrial Average was 0.53% lower to 15,888.78. The Nasdaq was slipping 1.11% to 4,015.70. 
  • "There is concern ahead of the Fed meeting -- we've had good GDP and employment data and now this budget deal alleviates some stress -- when we were expecting the taper earlier this year my gut said they wouldn't due to dysfunction in Washington -- but now that pressure has been relieved," Jon Sablowsky, head of trading at Brownstone Investment Group in New York said in a phone interview.
  • While the S&P 500 managed to hit a record closing high earlier in the week, it has since drifted lower on the Fed policy uncertainty and in the absence of any substantial economic releases.
  • Cisco Systems shed 1.7% after its push in a European Union court to overturn approval of Microsoft's 2011 takeover of Skype Technologies 
  • Costco  was falling 1% to $118.84, after posting first-quarter net income of 96 cents a share, 6 cents lower than Thomson Reuters forecast. After market close Tuesday, MasterCard's  board approved a stock split via a stock dividend and authorized a buyback program of up to $3.5 billion of Class A common stock. The stock was jumping 3.9% to $793.36.
  • Smith & Wesson  shot up 4.1% after handgun sales increased. Second-quarter net income of 28 cents a share beat consensus by 7 cents. Men's Wearhouse , due to report its third quarter after the bell, is expected to post earnings of 86 cents a share.
  • Wednesday's economic calendar is light with the Treasury Budget due at 2 p.m.
  • Germany's DAX was shedding 0.41% while the FTSE was off 0.24%. The Nikkei closed down 0.62% while the Hang Seng was off 1.71%.

--By Jane Searle in New York