US STOCKS-Wall Street falls as federal budget deadline draws near

Fri Sep 27, 2013 3:22pm EDT

* Congress to work during weekend to pass spending bill

* J.C. Penney stock slides after pricing of offering

* Nike shares jump a day after strong earnings

* Indexes off: Dow 0.5 pct, S&P 0.5 pct, Nasdaq 0.2 pct

By Caroline Valetkevitch

NEW YORK, Sept 27 (Reuters) - U.S. stocks declined on Friday, putting the S&P 500 and Dow on track for their first weekly drop in four, as congressional Democrats and Republicans struggled to pass a federal budget to avert a government shutdown days away.

The S&P 500 is roughly 2 percent below its record high set Sept. 18 when the Federal Reserve announced it would keep its stimulus program unchanged for now.

Time was running short for lawmakers to avert a partial shutdown of operations by the U.S. government on Oct. 1. Republicans in the House want to use the spending legislation to gut the new healthcare overhaul, a goal of the conservative Tea Party.

The Senate passed the emergency funding bill on Friday, which will keep U.S. agencies operating after Sept. 30. The measure must now be approved by the Republican-controlled House where it is expected to encounter rough going. Congress has scheduled sessions during the weekend.

"As we get closer to decision day and something happening, you get that concern that maybe something won't happen and how will the market react," said Alan Lancz, president of Alan B. Lancz & Associates Inc., an investment advisory firm based in Toledo, Ohio.

"People are pulling in their horns a little bit."

All 10 S&P 500 sectors were trading lower, with S&P 500 materials among the biggest losers.

In the latest comments by Fed officials on stimulus, Federal Reserve Bank of Chicago President Charles Evans said the Fed could start reducing its asset purchases this year based on economic forecasts, but the decision to wind back stimulus could be pushed into next year.

Minneapolis Fed President Narayana Kocherlakota told Reuters the Fed needs to speak more clearly and tell the world it will do "whatever it takes" to boost employment and not send the message that a very slow drop in joblessness is satisfactory.

New York Fed President William Dudley said the labor market is not yet healthy and inflation should firm in the months ahead.

The Dow Jones industrial average was down 80.40 points, or 0.52 percent, at 15,247.90. The Standard & Poor's 500 Index was down 8.10 points, or 0.48 percent, at 1,690.57. The Nasdaq Composite Index was down 8.54 points, or 0.23 percent, at 3,778.89.

Data showed U.S. household spending rose in August as incomes increased at the fastest pace in six months, a sign that momentum could be picking up in the U.S. economy. Another report showed consumer sentiment slid in September to its lowest in five months.

J.C.Penney said its public offering of 84 million common shares was priced at $9.65 per share. The stock fell 14 percent to $8.96 as the worst performer on the S&P 500.

Nike Inc shares jumped 4.5 percent to $73.51 as the biggest boost to the Dow, a day after the maker of sports clothes and shoes reported a stronger-than-expected quarterly profit.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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