NEW YORK -- U.S. stocks fell Thursday, with the S&P 500 tallying its first two-day losing run this month, as a weak regional manufacturing index and uncertainty over U.S. monetary moves hit sentiment.
"We're facing sequestration, gas prices are higher, and the payroll tax just went up, so people are starting to realize the impact on their paychecks," said Schwab director of market and sector research Brad Sorensen.
The approach of the March 1 deadline for federal budget reductions, known as sequestration, also kept investors on shaky ground, with the Chicago Board Options Exchange Volatility Index, or VIX, rising 9.5 percent following a 19 percent rise on Wednesday, its greatest leap since late 2011.
But Main Street and Wall Street are suffering from "government crisis fatigue -- as we've been down this road so many times, so it's another thing that goes into the mix," said Sorensen.
After falling as much as 93 points, the Dow Jones industrial average closed down 46.92 points, or 0.3 percent, to 13,880.62.
Moderating the drop, component Hewlett-Packard Co. rose 2.4 percent before reporting first-quarter results after the close.
Wal-Mart Stores Inc. climbed 1.5 percent after the retailer reported an estimate-beating fourth-quarter profit and raised its dividend.
The S&P 500 index retreated 9.53 points, or 0.6 percent, to 1,502.42.
"The S&P 500 is coming up on first support at 1,495. On a clear break, our downside target is the 1,474 area. This is the home of the 50-day moving average and the January break," noted Elliot Spar, market strategist at Stifel Nicolaus & Company.
Verifone Systems Inc. fell nearly 43 percent after the manufacturer of credit-card terminals projected second-quarter profit below Wall Street estimates, thanks to Europe's soft economic climate.
Safeway Inc. shares leapt 14 percent after the grocery-store chain reported a rise in fourth-quarter net income, with its chairman and chief executive telling a conference call there had been no noticeable impact from the
payroll-tax cut that reduced paychecks for many.
The Nasdaq composite index declined 32.92 points, or 1 percent, to 3,131.49.
Investors were looking for a reason to pause an advance that has the S&P 500 index currently up more than 5 percent for the year, said Schwab's Sorensen.
"Typically, after the run we've seen, I wouldn't be surprised by a pullback in the 3 percent to 5 percent range. We probably needed a bit of a selloff to get some of the speculative money out of there," he said.
On Wednesday, stocks fell sharply after the release of minutes from the last Federal Open Market Committee meeting revealed talk of scaling back economic stimulus by varying the rate of Fed asset purchases.
"There were a few Fed members that talked about the possibility of adjusting their asset purchases. And certainly there are some on the street that believe they should stop, or at least reduce them, and let the economy start running on its own. It's encouraging they believe the economy is strong enough to handle that now," Sorensen said.
Equity investors "might have been looking for an excuse to take profits," said Peter Schiff, CEO of Euro Pacific Capital Inc.
"If it wasn't the Fed minutes, it might have been something else," he added.
While the market is likely in for near-term declines, stock prices should trend higher, given the Federal Reserve's policy of monetary easing, said Schiff, who opposes the economic stimulus.
"I don't think stock prices are going to go up as fast as gas prices, for example," Schiff said.
In economic news, the index of U.S. leading indicators climbing for a second month in January, and sales of previously owned homes up 0.4 percent in January.
The Labor Department reported jobless claims rose by 20,000 to 362,000 last week and that consumer prices were little changed last month, with a decline in energy costs helping to offset rising prices for goods and services.