NEW YORK -- U.S. stocks fell, with the Standard & Poor's 500 Index dropping to the lowest level in a month, as lawmakers remained deadlocked over extending the nation's debt limit to avoid a default.
Bank of America and Wells Fargo paced declines among banks, each slipping 1.7 percent. IBM retreated 1.1 percent as Barclays lowered its recommendation. Cooper Tire & Rubber sank 13 percent as Apollo Tyres is seeking to cut its $2.5 billion offer to buy the U.S. company. Apple gained 1 percent after Jefferies Group upgraded the stock.
The S&P 500 fell 0.9 percent to 1,676.12 at 4 p.m. in New York, the lowest since Sept. 9. The Dow Jones Industrial Average declined 136.34 points, or 0.9 percent, to 14,936.24. About 5 billion shares changed hands on U.S. exchanges, the slowest trading since Aug. 29.
"The volume is very light so I do think investors are trying to feel their way through this," Walter Todd, chief investment officer at Greenwood Capital, said in a phone interview from Greenwood, S.C. He helps manage $950 million. "Each day that it goes by without any type of solution or any hope of a solution, the market gets more and more concerned about what the ultimate outcome is."
House Speaker John Boehner, R-Ohio, said Sunday in an interview on ABC's "This Week" that the House of Representatives can't pass a debt-ceiling increase without packaging it with other provisions. Boehner said the country could default if President Barack Obama doesn't
negotiate. On Monday Obama challenged congressional Republicans to raise the U.S. debt limit by next week and said he's willing to negotiate on fiscal terms once that is done and government funding is restored.
Without an increase to the debt limit, the United States will exhaust its borrowing authority on Oct. 17 and would run out of funds to pay all of its bills sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office. Senate Democrats could introduce legislation as soon as Monday that gives Obama the authority to raise the debt ceiling unless two-thirds of Congress disapproves, according to a Senate Democratic aide.
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. The S&P 500 fell more than 11 percent in three days.
Moody's Investors Service said it sees a "very low" chance the United States will default on its debt payments. The impact of the partial government shutdown on the economy may not be particularly damaging in the short term, and the effect would be seen gradually over time if it was an extended one, Chief Executive Officer Ray McDaniel said in a Bloomberg Television interview in Bali, Indonesia, on Saturday.