US Markets

U.S. stocks erased earlier gains Tuesday after Federal Reserve officials took no immediate actions to bolster the economy but left their policy options open for 2012. The Dow Jones Industrial Average was up one point at 12026 recently, bobbing in and out of the red. The blue-chip Dow had gained as much as 126 points earlier in the session before paring its gains after the Fed statement. Prior to Tuesday, the Dow had notched three consecutive triple-digit swings. The Standard & Poor's 500-stock index slipped three points, or 0.2%, to 1234.

The technology-heavy Nasdaq Composite fell 15 points, or 0.6%, to 2597. The Fed remains concerned the economy could be hit by higher taxes and continued government layoffs next year. The repercussions from the sovereign-debt crisis in Europe also could roil the U.S. economy. Some investors were hoping Fed officials would shed some light on whether QE3 is an option heading into the new year.

Earlier, German Chancellor Angela Merkel reiterated her rejection of increasing the size of Europe's permanent bailout fund, the European Stability Mechanism. The market opened higher after the euro zone's government bailout fund received a reassuring level of demand in its first sale of short-dated debt. The sale underscored a sign that investors were willing to put their faith in the next phase of Europe's rescue project. But U.S. retail sales rose less than expected last month, a disappointing start to the holiday shopping season. While consumers are spending more, high unemployment and worries about the European debt crisis are likely making some shoppers cautious during the holiday season. In corporate news, shares of DuPont were down 0.6% but had been up earlier after the blue-chip diversified manufacturer provided an upbeat earnings and revenue outlook for 2012. Best Buy slumped 15% as the consumer-electronics retailer's fiscal third-quarter profit dropped 29%.

European Markets

European stocks pared gains Tuesday on reports German Chancellor Angela Merkel had rejected raising the cap on the European Stability Mechanism, which currently rests at EUR500 billion. Concerns regarding the health of the euro zone resurfaced late in the session on the reported comments by Merkel, while the threat of downgrades also lingered after credit-rating agency Moody's Investors Service put eight Spanish banks on review for a possible downgrade.

Earlier in the session, key bond auctions were well-received by investors, particularly the strong demand at a European Financial Stability Facility bond auction. The Stoxx Europe 600 index closed up 0.5% at 237.30, paring gains into the close. The index hit an intraday high of 238.81 after the euro area's bailout fund received a reassuring level of demand in its first sale of short-dated debt. It sold EUR1.972 billion of three-month treasury bills, opting to raise shorter-term funding after its 10-year bond sale in November struggled to receive adequate demand. In addition, an auction of short-term Spanish debt exceeded its target, with the Treasury selling EUR4.94 billion of 12-month and 18-month bills, and at lower yields than at the previous auction. The focus remains on this area of the market, with Italy selling up to EUR3 billion of bonds Wednesday and Spain auctioning up to EUR3.5 billion of bonds Thursday.

Elsewhere, Germany's DAX index fell 0.2% to 5774.26, and France's CAC-40 closed down 0.4% at 3078.72, both hurt by Merkel's comments. Meanwhile, the U.K.'s FTSE 100 closed 1.1% higher at 5490.15, largely helped by a rise in oil majors on rumors Iran was going to close a key Middle East oil-shipping channel. The FTSE 350 oil & gas producers index finished up 2.3% on the speculation and after crude-oil futures leapt by more than 3%. However, the price of crude fell back just after the close of the FTSE 100, as the rumor proved unfounded. In corporate news, Deutsche Boerse fell 1% after it said it had submitted along with NYSE Euronext remedy proposals to the European Commission for their planned merger. Shares of Commerzbank fell 4.6% following media reports that the bank and the German government are in talks over potential state aid. In London, hotel and restaurant group Whitbread fell 3.9% after a trading update.

Asian Markets

Asian markets ended lower Tuesday amid fresh jitters over Europe's sovereign-debt problems after ratings agencies issued a weak assessment of European leaders' latest plans to stem the debt crisis. Japan's Nikkei Stock Average fell 1.2% to 8552.81, South Korea's Kospi slid 1.9% to 1864.06, China's Shanghai Composite dropped 1.9% to 2248.59, falling for the fourth-straight session, while Hong Kong's Hang Seng Index fell 0.7% to 18,447.17 and Taiwan's Taiex slid 0.8% to 6896.31. Shares of exporters fell across the region amid concerns over the outlook for the European economy. In Tokyo, Sony Corp. fell 2.6% and Honda Motor Co. skidded 2.9%. Europe-exposed clothing retailer Esprit Holdings Ltd. fell 2.8% in Hong Kong.

Personal computer makers and some of their suppliers were hurt after chipmaker Intel Corp. lowered its fourth-quarter sales forecast due to supply constraints resulting from the flooding in Thailand. Acer Inc. shed 0.9% and Quanta Computer Inc. dropped 2.2% in Taipei, while NEC Corp. fell 1.8% in Tokyo and Lenovo Group Ltd. lost 0.4% in Hong Kong. South Korean automakers also weakened, with Hyundai Motor Co. down 3.9% and Kia Motors Corp. off 2.8%. Commodity-linked stocks also weakened across the region.

Aluminum Corp. of China Ltd. declined 3%, while Jiangxi Copper Co. traded down 1.6% in Hong Kong; their Shanghai-listed stocks dropped 2.8% and 3.2%, respectively. Shares of China Gas Holdings Ltd. soared 20.4% on news that a consortium of China Petroleum & Chemical Corp., or Sinopec, and ENN Energy Holdings Ltd. has agreed to buy the outstanding shares in the company for about $2.15 billion. Sinopec shares fell 0.4% and ENN lost 2.6%.

Commodities

Base metal prices closed lower on the London Metal Exchange Tuesday as the euro sank to an 11-month low and confidence over Europe's outlook was further sapped by reports that Germany had rejected any expansion of the euro zone's bailout fund. The markets meanwhile lacked buyers to cushion the downside as investors cautiously took to the sidelines ahead of the Federal Reserve's policy statement. LME three-month copper ended the session down 0.1% at $7,600 a metric ton, while three-month aluminum ended 0.6% lower at $2,001/ton. Three-month tin, the most thinly traded of the contracts, was down 1.8% at $19,500/ton. Crude-oil futures leapt more than 3% Tuesday morning on rumors that Iran closed a key Middle East oil-shipping channel, but then fell back as the rumor proved unfounded.

Light, sweet crude oil for January delivery rose as much as 3.6% a barrel on the New York Mercantile Exchange, before settling up $2.37 at $100.14. Gold ended lower, spending much of the day little changed amid low volume as ongoing concerns about Europe's sovereign debt crisis and a weaker euro continued to weigh on prices. The most actively traded contract, for February delivery, fell $5.10, or 0.3%, to settle at $1,663.10 a troy ounce. This was the lowest level since Oct. 24, when the most active contract settled at $1,654.30 a troy ounce. Thinly traded December-delivery gold fell $4.30, or 0.3%, to settle at $1,659.90 a troy ounce.