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Stocks fall on budget fight, economic worries

Stocks closed down on Wall Street on concerns about the economy Monday. A looming budget fight in Washington also weighed down stocks.

By Steve RothwellAP Markets Writer / September 23, 2013

A trader works on the floor of the New York Stock Exchange shortly after the start of trading in New York, Monday. Financial stocks fell the most among the 10 industrial groups in the S&P 500 index Monday.

Lucas Jackson/Reuters

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 Concerns about the strength of the economy and the potential for a budget fight in Washington pushed down the stock market Monday.

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The Dow Jones industrial average and the Standard & Poor's 500 index fell for a third straight day.

The Dow jumped 147 points last Wednesday to close at an all-time high after the Fed decided to keep its huge economic stimulus program intact. But that rally has been wiped out by anxiety over a budget and debt fight in Washington over the past three days.

Investors initially cheered the Fed's surprise decision to keep its stimulus in place because the program has helped sustain a bull run in stocks dating back to March 2009.

Doubts have crept into investors' minds, however, because the central bank thinks the economy isn't strong enough for it to pull back the stimulus. William Dudley, the President of the Fed's New York Branch said Monday that while the economy was improving, "the headwinds" created by the financial crisis were only easing slowly.

"At first blush (the stimulus) looks positive," said Kate Warne, an investment strategist at Edward Jones, a financial advisor. "But at second blush it says conditions weren't as strong as we were previously thinking. Markets are now responding to that."

The Fed is buying $85 billion in bonds each month to hold down long-term interest rates and encourage borrowing and spending.

On Monday, the S&P 500 index dropped 8.07 points, or 0.5 percent, to 1,701.84. The index was fractionally lower than its level before the Fed's statement last Wednesday.

The Dow fell 49.71 points, or 0.3 percent, to 15,401.38 The Nasdaq composite fell 9.44 points, or 0.3 percent, to 3,765.29.

Financial stocks fell the most among the 10 industrial groups in the S&P 500 index. Investors sold on concerns that earnings would be hurt by lower trading volumes of bonds and foreign currencies at investment banks.

Citigroup fell $1.64, or 3.2 percent, to $49.57 after the Financial Times reported that the bank had suffered a "significant decline" in trading revenues that would crimp its earnings.

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