The possible shutdown of the federal government, set to occur Tuesday, sent stock prices lower Monday, declining for the fifth time in the last six sessions.
The Dow Jones industrial average fell 128.57 points to 15,129.67. The Nasdaq composite index dropped 10.12 points to 3,771.48 and the Standard & Poor’s 500 Index lost 10.20 points to 1,681.55.
The uncertainty of the effect of a government shutdown overshadowed the full slate of economic news due out this week including key reports on the nation's labor market.
Commodities followed stocks lower. Gold fell $4.60 to $1,334.70 an ounce and oil slipped 54 cents to $102.33 a barrel.
All 10 main industries in the S&P 500 retreated. Procter & Gamble Co. (NYSE: P&G) and Coca-Cola Co. (NYSE: KO) slipped more than 1.5 percent to pace declines among consumer-staples companies. Devon Energy Corp. (NYSE: DVN) and Tesoro Corp. (NYSE: TSO) lost at least 1.6 percent as energy shares slid 0.8 percent amid a drop in oil prices. J.C. Penney Co. (NYSE: JCP) fell 2.7 percent, extending last week’s losses.
“We are at the mercy of whatever develops in Washington,” said Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc. “An attempt to prevent a shutdown is not totally unexpected, but some agreement will be better than none.”
U.S. lawmakers have to approve emergency legislation by midnight to keep the federal government operating from tomorrow, the beginning of the 2014 fiscal year. Failure to do so may result in as many as 800,000 federal employees being placed on temporary unpaid leave.
Republicans and Democrats remained at odds over whether to tie any changes to President Barack Obama’s Affordable Care Act to a short-term extension of government funding. The Senate voted 54-46 to reject the House’s latest plan, in a party-line move that puts the pressure back on House Republicans.
In a government shutdown, essential operations and programs with dedicated funding would continue. The Treasury would sell debt, while economic reports from the Commerce Department would be suspended and the Bureau of Labor Statistics would stop operations.
Commerce is scheduled to release data this week on construction spending and factory orders before the Labor Department’s closely watched jobs report Friday.
The S&P 500 fell 1.1 percent last week, its first weekly drop since August, amid concern the budget impasse will hurt the economy. A shutdown would reduce fourth-quarter economic growth by as much as 1.4 percentage points depending on its duration, according to economists. Three rounds of Fed stimulus and better-than-forecast corporate earnings have pushed the S&P 500 up 149 percent from a March 2009 low.
Last year’s debate over federal spending also weighed on the equities market, only to be followed by a market rally in 2013. The S&P 500 dropped as much as 3.4 percent over the last two weeks of 2012 as lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff. It then jumped 5 percent in January for the best start to a year since 1997 after a last-minute budget deal was struck.
Energy producers, consumer-staples and financial stocks fell as much as 0.7 percent, leading declines among all 10 groups in the S&P 500.
Procter & Gamble slipped 2.1 percent, the most in the Dow, to $75.59 and Coca-Cola retreated 1.4 percent to $37.88.
Devon Energy slid 1.6 percent to $57.76 and Tesoro retreated 1.7 percent to $43.98.
Apple Inc. (Nasdaq: AAPL) declined 1.2 percent to $476.75. The maker of iPhones climbed 3.3 percent last week after reporting record sales of the latest models of the smartphone in their debut weekend.
J.C. Penney dropped 2.7 percent to $8.81. The department-store chain plummeted 30 percent last week as it began a share offering to raise as much as $932 million and lowered its year-end liquidity forecast. J.C. Penney, which hasn’t turned a quarterly profit since mid-2011, is down 55 percent for the year.
Regeneron Pharmaceuticals Inc. (Nasdaq: REGN) jumped 2.4 percent to $312.87 following positive trial data for Eylea as a treatment for diabetic macular edema.
Chipotle Mexican Grill Inc. (NYSE: CMG) added 2.3 percent to $428.80 as the shares were raised to “overweight” by Morgan Stanley.
— Bloomberg contributed to this report