US STOCKS-Retailers lead Wall St lower, 'cliff' still a concern

* Retail stocks among S&P 500's biggest decliners

* S&P/Case-Shiller data tops expectations

* Obama heads back to Washington after vacation

* Indexes down: Dow 0.3 pct, S&P 0.5 pct, Nasdaq 0.7 pct

NEW YORK, Dec 26 (Reuters) - U.S. stocks fell on Wednesday,

dragged lower by retail stocks after a report showed consumers

were less enthusiastic about the holiday shopping season than

last year.

Many investors said concerns about the "fiscal cliff" kept

shoppers away from stores, suggesting markets may struggle to

make any ground until next year.

Holiday-related sales rose 0.7 percent from Oct. 28 through

Dec. 24, compared with a 2 percent increase last year, according

to data from MasterCard Advisors SpendingPulse. The Morgan

Stanley retail index skidded 1.8 percent while the SPDR

S&P Retail Trust slipped 1.5 percent to 61.24.

"With the 'fiscal cliff' hanging over our heads, it was hard

to convince people to shop, and now it's hard to convince

investors that there's any reason to buy going into year-end,"

said Rick Fier, director of trading at Conifer Securities in New

York.

President Barack Obama is due back in Washington early

Thursday for a final effort to negotiate a deal with Congress to

bridge a series of tax increases and government spending cuts

set to begin next week, the so-called "fiscal cliff" many

economists worry could push the economy into recession if it

takes effect.

Coach Inc fell 6 percent to $54.08 as the biggest

decliner on the S&P 500, followed by Ralph Lauren Corp,

off 4 percent to $144.99. Online retailer Amazon.com

fell 3.1 percent to $250.52. Gamestop Corp, Urban

Outfitters and Abercrombie & Fitch were also

among the S&P's biggest decliners.

The Dow Jones industrial average was down 34.16

points, or 0.26 percent, at 13,104.92. The Standard & Poor's 500

Index was down 6.57 points, or 0.46 percent, at 1,420.09.

The Nasdaq Composite Index was down 18.82 points, or

0.62 percent, at 2,993.78.

Volume was light, with only 2.17 billion shares having

traded at midday on the New York Stock Exchange, the Nasdaq and

the NYSE MKT. Many senior traders were still on vacation during

this holiday-shortened week and major European markets were

closed for the day.

Still, Wednesday marked the third day of losses for the S&P

500 in its worst three-day decline since mid-November.

A Republican plan that failed to gain traction last week

triggered the S&P 500's recent drop, highlighting the market's

sensitivity to headlines centered on the budget talks.

During the last five trading days of the year and the first

two of next year, it's possible for a "Santa rally" to occur.

Since 1928, the S&P 500 has averaged a gain of 1.8 percent

during that period and risen 79 percent of the time, according

to data from PrinceRidge.

"While it's unlikely there could be a budget deal at any

time, no one wants to get in front of that trade," said

Conifer's Fier, who helps oversee about $12 billion in assets.

"Investors can easily make up for any gains when there's more

action in 2013."

The benchmark S&P 500 Index is up 12.8 percent for the year,

and has recouped nearly all of the losses after the U.S.

election, when the "fiscal cliff" concerns moved to the

forefront. This is the best yearly gain for the S&P 500 since

2010.

Data showed U.S. single-family home prices rose in October,

reinforcing the view that the domestic real estate market is

improving, as the S&P/Case-Shiller composite index of 20

metropolitan areas gained 0.7 percent in October on a seasonally

adjusted basis.

In the energy sector, China's Sinopec Group and

ConocoPhillips will research potentially vast reserves

of shale gas in southwestern China over the next two years,

state news agency Xinhua reported. Conoco's stock fell 0.8

percent to $57.99.

An outage at one of Amazon.com Inc's web service centers hit

users of Netflix Inc's streaming video service on

Christmas Eve and was not fully resolved until Christmas Day, a

spokesman for the movie rental company said on Tuesday. Netflix

rose 0.8 percent to $90.97.

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