* Home Depot shares rally after results, outlook
* Microsoft stock drops on executive exit
* Dow off 0.3 pct, S&P off 0.3 pct, Nasdaq down 0.6 pct
NEW YORK, Nov 13 (Reuters) - Retail stocks, led by a jump in Home Depot shares, curbed Wall Street's decline on Tuesday as concerns about the looming "fiscal cliff" weighed on sentiment.
Investors continue to gauge how a divided U.S. Congress will deal with a series of mandated tax hikes and spending cuts that start to take effect next year and could take the world's largest economy back into recession.
Microsoft further dragged on technology shares and the Nasdaq after the surprising departure of an executive who had been seen as CEO material.
Home Depot raised its full-year outlook, adding to signs of a rebirth of the U.S. housing market, driving the Dow component's stock to a level not seen since April 2000.
"Stronger retail sales in the fourth quarter portend well for equity performance in the fourth quarter, under the parameters of a normal scenario," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
She said the market's reaction is not larger on the upside "because of the macro-economic/political underpinning" regarding the fiscal cliff.
The Dow Jones industrial average dropped 33.86 points, or 0.26 percent, to 12,781.22. The S&P 500 fell 3.57 points, or 0.26 percent, to 1,376.46. The Nasdaq Composite Index lost 18.04 points, or 0.62 percent, to 2,886.22.
The S&P 500 is down 2.3 percent so far this month.
Dow component Home Depot Inc raised its full-year outlook even before accounting for any future sales lift in the aftermath of Superstorm Sandy, as the retailer benefited from a recent uptick in the U.S. housing market. Home Depot's stock hit an intraday high at $64.44, and was up 3.7 percent at $63.42 in the final minutes befor the closing bell. The stock is on track to close at its highest in more than 12 years.
TJX Cos also beat analysts' forecasts and its shares added 2.8 percent to $42.10. The S&P retail sector index advanced 1.4 percent.
Microsoft shares fell 3.1 percent to $27.13 after the surprising departure of a key executive, who analysts said marks the loss of the driving force behind the company's biggest product.
Technology shares slipped, with an S&P technology index down 0.7 percent.
AK Steel Holding Corp shares fell 16.5 percent to $4.56 after the company forecast a fourth-quarter loss.
A German government source told Reuters European countries were considering paying Greece several aid tranches totalling around 44 billion euros.
The comments came after a public clash between Greece's international lenders over how Athens can bring its debts down to a sustainable level threatened to escalate the euro zone crisis yet again.