* Moody's cuts France credit rating
* Hewlett-Packard tumbles after charge
* Housing starts rise to highest rate in over four years
* Indexes off: Dow off 0.5 pct, S&P 0.4 pct, Nasdaq 0.4 pct
By Chuck Mikolajczak
NEW YORK, Nov 20 (Reuters) - U.S. stocks fell on Tuesday as
a credit downgrade of France by ratings agency Moody's and a
huge accounting charge by Hewlett-Packard gave investors reasons
to pull money off the table after a two-day rally.
Hewlett-Packard Co tumbled 11.8 percent to $11.73 as
the computer and printer maker swung to a fourth-quarter loss.
The company said it took an $8.8 billion charge related to its
acquisition of software firm Autonomy, citing "serious
H-P was the biggest drag on both the Dow and S&P 500, and
the NYSEArca computer hardware index lost 2 percent.
Stocks were on track to end a two-day rally in which the
benchmark S&P index had risen more than 2 percent, its best
two-day run in nearly four months. Optimism that Washington
politicians could agree on a deal to stave off the U.S. "fiscal
cliff" drove the market higher.
Moody's Investors Service cut France's sovereign rating by
one notch to Aa1 after the market's close on Monday, citing an
uncertain fiscal outlook as a result of the weakening economy.
While the move was expected after Standard & Poor's issued a
similar downgrade in January, the Moody's decision was a
reminder of the headwinds buffeting the global economy and the
danger of contagion by the euro zone's debt crisis.
President Barack Obama and congressional leaders hope to
start serious negotiations after the Thanksgiving holiday on
Thursday on avoiding the "fiscal cliff," a series of tax hikes
and spending cuts that threaten economic recovery.
"The market is going to go up and down based on rhetoric
coming out of Washington," said Steven Roge, portfolio manager
at RW Roge & Co in Beverly, Massachusetts.
"Because the delta of outcomes is so gigantic - you could
have us go off the fiscal cliff, Europe blow up or fiscal cliff
gets passed, growth resumes, Europe grows its way out of the
debt crisis - we are just waiting for direction and the fiscal
cliff is that first piece of information."
A bright spot for the economy came in data showing U.S.
housing starts rose to their highest rate in more than four
years in October, suggesting the housing market recovery was
gaining steam. The PHLX housing sector index advanced 1.4
percent, led by a 4 percent climb in PulteGroup Inc to
Best Buy Co Inc dropped 9.4 percent to $12.46 after
the world's largest consumer electronics chain reported a
weaker-than-expected profit and its ninth same-store sales
decline in 10 quarters.
The Dow Jones industrial average dropped 59.51
points, or 0.47 percent, to 12,736.45. The Standard & Poor's 500
Index dropped 5.61 points, or 0.40 percent, to 1,381.28.
The Nasdaq Composite Index dropped 11.13 points, or 0.38
percent, to 2,904.94.
The S&P 500 index had fallen 5.3 percent between election
day and the start of the rebound as angst over a possible budget
deal drove investors to sell stocks and limit the impact tax of
expected tax increases on capital gains and dividends.
Federal Reserve Chairman Ben Bernanke will speak before the
Economic Club of New York and may offer clues about the Fed's
intentions on more monetary stimulus. Market participants
currently expect the Fed to step up asset purchases in 2013
after Operation Twist expires. His remarks are scheduled for
12:15 p.m (1715 GMT).
H.J. Heinz Co lost 1.5 percent to $57.84 and
Campbell Soup Co shed 0.8 percent to $36.25 after both
companies reported quarterly earnings.