Overnight Markets: Wall Street drops amid continuing fiscal concerns

U.S. stocks declined on Wednesday amid concern about the budget debate in Washington after President Barack Obama stuck to his pledge to raise taxes on the wealthy, and as violence increased in the Middle East.

The Dow Jones industrial average fell 185 points, or 1.45%, to 12,571 at the close. The S&P 500 dropped 19 points, or 1.39%, to 1,355. The Nasdaq Composite lost 37 points, or 1.29%, to 2,847.

Wall Street opened higher after Cisco Systems Inc reported first-quarter earnings and revenue late Tuesday that beat expectations, driving its stock up 4.8%. But the positive momentum was short-lived.

Investors shed positions amid continuing uncertainty over the looming fiscal cliff after Obama, in his first press conference since re-election, held to his position that marginal tax rates will have to rise to tackle the nation's deficits.

Adding to the negative sentiment, Israel launched a major offensive against Palestinian militants in Gaza, killing the military commander of Hamas in an air strike and threatening an invasion of the enclave. Egypt recalled its ambassador from Israel in retaliation.

Industrial shares suffered the most after a 1% spike in crude prices after the Israeli offensive on Gaza.

FedEx Corp shares fell 3.7%, while Boeing erased 2.8%. Bank of America lost 3.6% and JP Morgan declined 1.9%.

Home Depot Inc. fell 3%, while Advanced Micro Devices Inc. fell 7.7% after the second-largest maker of personal-computer processors said it isn’t actively pursuing a sale of the company or a significant sale of assets.

In contrast, Facebook surged 12.6% as investors were relieved that expiring trading restrictions on a huge block of shares did not trigger an immediate wave of insider selling.

Zynga Inc. rose 1.4% after the largest maker of games played on social networks said chief financial officer David Wehner is departing to take a senior finance job at Facebook.