NEW YORK (TheStreet) -- The S&P 500 closed the week lower Friday amid anxiety over the ongoing budget negotiations in Washington. A worse-than-expected report on U.S. consumer sentiment for September helped extend the losses seen at the market open.
Lawmakers must agree to an emergency budget deal by Monday in order to allow key federal government services to continue running through Dec. 15 from the start of the new fiscal year on Oct. 1. It's estimated that a U.S. government shutdown could reduce economic growth in the fourth quarter by up to 1.4 percentage points.
The S&P 500 slumped 0.41% to 1,691.73. TheDow Jones Industrial Average shed 0.46% to 15,258.24. The Nasdaq declined 0.15% to 3,781.59.
Investors displayed uncertainty as to whether Washington politicians would reach a deal to keep the government funded, and have not forgotten Congress' inability in summer 2011 to avoid infighting over raising the debt ceiling, said Aaron Izenstark, chief investment officer of IRON Financial.
"Unease over the budget and debt ceiling uncertainties emanating from Washington may have played some role in the decline in sentiment since the summer (similar patterns were evident prior to the fiscal cliff last year and negotiations in 2011) although other factors, such as stock market gains and improvement in the housing market, likely continue to support a gradual upward trend," Peter Newland, an economist with Barclays in New York, wrote in a client note.
J.C. Penney (JCP) was the most prominent decliner in the S&P Friday, plunging 13.2% to $9.05. The company is looking to raise more than $800 million in equity as the struggling department store chain looks to build up its cash reserves heading into the holiday season. J.C. Penney shares have had a rocky week, down 20% since last Friday. On Wednesday, Goldman Sachs credit analysts issued a report initiating an "underperform" rating on the company's debt. The analysts said they had concerns about the company's liquidity.