* Congress to work during weekend to pass spending bill
* Obama says will not agree to delay healthcare act
* 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 0.4 pct, Nasdaq 0.2 pct
By Caroline Valetkevitch
NEW YORK, Sept 27 (Reuters) - U.S. stocks declined on Friday and the S&P 500 and Dow posted their first weekly drop in four, as Democrat and Republican lawmakers struggled to agree on an emergency funding bill to avert a U.S. government shutdown days away.
The S&P 500 declined 1.1 percent for the week and is roughly 2 percent below its record high set Sept. 18 when the Federal Reserve announced it would keep its stimulus program unchanged for the present.
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. The House could vote on a bill in an unusual Saturday or Sunday session.
"I think investors right now are contemplating what is the impact on consumer confidence, revenues and earnings if Washington gets caught up in a quagmire," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Eight of the 10 S&P 500 sectors ended lower, with the materials sector leading losses on the index. The S&P materials index declined 1.2 percent.
The Dow Jones industrial average was down 70.06 points, or 0.46 percent, at 15,258.24. The Standard & Poor's 500 Index was down 6.92 points, or 0.41 percent, at 1,691.75. The Nasdaq Composite Index was down 5.83 points, or 0.15 percent, at 3,781.59.
For the week, the Dow was down 1.3 percent and the Nasdaq was up 0.2 percent.
Just before the close, President Barack Obama urged House Republicans to avoid a government shutdown without cuts to his healthcare law or other conditions.
He said he would not agree to delaying or defunding the new healthcare reform law, and that the Senate acted responsibly earlier in the day to keep the government open.
Shares of J.C.Penney fell 13.1 percent to $9.05 and was the worst percentage decliner on the S&P 500 after it said its public offering of 84 million common shares was priced at $9.65 per share.
Shares of Lumber Liquidators Holdings declined 5.2 percent to $107.13 after the company said it was cooperating with authorities after federal agents searched its headquarters and another office in a probe of the import of certain wood flooring products.
Among gainers, Nike Inc jumped 4.7 percent to $73.64, giving the Dow its biggest boost, a day after the maker of sports clothes and shoes reported a stronger-than-expected quarterly profit.
The latest Fed officials to comment on stimulus measures included Federal Reserve Bank of Chicago President Charles Evans, who 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.
The day's economic 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.
Volume totalled about 5.5 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.3 billion this year.
Decliners outpaced advancers on the NYSE by about 2 to 1 and on the Nasdaq by about 1.6 to 1.