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Market Hustle: Stocks Tumble as Functional Congress Fuels Fed Pullback Fears

NEW YORK (TheStreet) -- Major U.S. stock markets dropped Wednesday amid growing speculation 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 fell 1.13% to close at 1,782.22 while the Dow Jones Industrial Average was 0.81% lower to 15,843.53. The Nasdaq slipped 1.4% to 4,003.81. 
  • "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.
  • Cisco Systems (CSCO) shed 1.6% to close at $20.87 as Citi initiated coverage of the tech giant with a sell rating and an $18 price target.
  • Costco (COST) fell 1.2% to $118.57 after posting first-quarter net income of 96 cents a share, 6 cents lower than Thomson Reuters forecast. MasterCard's (MA) popped 3.6% to $790.93 after the credit-card company's board approved a stock split and authorized a buyback program of up to $3.5 billion of Class A common stock.
  • Smith & Wesson (SWHC) shot up 4% after handgun sales increased and the company's fiscal econd-quarter net income of 28 cents-a-share beat analysts' consensus by 7 cents. 
  • S&P Winner and Loser: Scripps Networks Interactive  (SNI) was the top performer in the S&P 500 while Laboratory Corp.  (LH) was its biggest laggard.
  • The Treasury Budget for November revealed the the government's deficit continues to shrink, most recently falling $135.2 billion.
  • Germany's DAX decreased 0.41% while the FTSE was off 0.23%. The Nikkei closed down 0.62% while the Hang Seng was off 1.71%.

--By Jane Searle and Joe Deaux in New York 

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