The lack of progress in resolving the federal budget disputes once again pushed investors to sell Thursday.
The Dow Jones Industrial Average fell 136.66 points to 14,996.48, the ninth decline in the past 11 sessions. The Nasdaq Composite Index dropped 40.68 points to 3,774.34, and the Standard & Poor’s 500 Index was off 15.21 points to 1,678.66, dropping the most in a month.
The Department of Labor said initial claims for jobless benefits rose by 1,000 in the past week to 308,000. The department confirmed that it will not release the September employment data Friday as was scheduled before the partial shutdown of the government.
Commodities were slightly lower. Gold fell for the third consecutive session, down $3.10 to $1,317.60 an ounce, while oil lost 79 cents to $103.31 a barrel.
Eli Lilly Co. (NSE: LLY) dropped 3.4 percent to $48.80 after the drugmaker said it would be “challenging” for it to meet its 2014 sales target.
United Technologies Corp. (NYSE: UTX), a supplier of helicopters and jet engines to the military, retreated 1.2 percent after saying the shutdown would lead to as many as 5,000 temporary layoffs.
Boeing Co. (NYSE: BA) sank 2.2 percent as industrial stocks led losses among S&P groups.
PulteGroup Inc. (NYSE: PHM) slid 2.4 percent as all 11 members of an S&P gauge of homebuilders fell.
Talks Wednesday between congressional leaders and President Barack Obama failed to break the fiscal stalemate that has caused the first government shutdown in 17 years.
Obama said Thursday that there is only “one way out” — for House Speaker John Boehner to allow a vote on a stopgap spending bill without conditions. The speaker urged Democrats to negotiate a settlement, blaming them for causing the stoppage.
The S&P 500 fell as much as 1.4 percent before trimming its decline. The paring accelerated after Boehner’s spokesman said the speaker would not let the government breach the debt ceiling.
The Treasury has said measures to avoid exceeding the $16.7 trillion debt ceiling will be exhausted by Oct. 17 and warned Thursday that a default caused by failure to raise it could have catastrophic consequences that might last decades.
S&P stripped the U.S. of its AAA credit rating in August 2011 amid a stalemate between Obama and Congress over whether to raise the debt ceiling, and the S&P 500 fell more than 11 percent in three days.
The losses were later reversed, as the Federal Reserve pledged to hold the benchmark interest rate near zero and maintain bond purchases to support the economy. The S&P 500 gained 25 percent in the 12 months through August 2012.
The S&P 500 gained 0.7 percent in the first two days of the shutdown, as investors speculated that economic effects would be limited.
A stoppage lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists in a Bloomberg survey, with the costs accelerating if the closure persists.
Data on Thursday showed service industries in the U.S. expanded in September at a slower pace than forecast, indicating a pause in the momentum of the biggest part of the economy before the federal government closed.
The Institute for Supply Management’s nonmanufacturing index fell to 54.4 in September from 58.6 the prior month. The median forecast in a Bloomberg survey called for a drop to 57. The figure includes industries that range from utilities and retail to health care, housing and finance and make up almost 90 percent of the economy.
All 10 main S&P 500 industries retreated at least 0.4 percent Thursday, with utility and industrial stocks sinking at least 1.1 percent to pace declines. Boeing Co. dropped 2.2 percent to $115.24 for the steepest slide in the Dow.
A gauge of stocks whose earnings are most closely tied to economic growth slipped 1.1 percent, the most in a month. Hewlett-Packard Co. (NYSE: HPQ) dropped 2.2 percent to $20.92.
The S&P Supercomposite Homebuilding Index lost 1.9 percent, as all 11 members retreated. PulteGroup slumped 2.4 percent to $16.50 and D.R. Horton Inc. (NYSE: DHI) dropped 2.4 percent to $19.07.
United Technologies lost 1.2 percent to $103.69. The military contractor said the federal impasse will force it to lay off as many as 5,000 employees.
PVH Corp. (NYSE: PVH) jumped 4.4 percent to $122.69. The maker of Calvin Klein and Tommy Hilfiger clothing said Wednesday that it plans to sell its G.H. Bass and Co. division to G-III Apparel Group Ltd. for $50 million in cash.
Constellation Brands Inc. (NYSE: STZ) added 3.2 percent to a record $60.15. The maker of Svedka Vodka, Black Velvet Canadian Whiskey and Robert Mondavi wines raised its earnings forecast for fiscal 2014 after reporting second-quarter earnings that surpassed analyst expectations.
— Bloomberg contributed to this report