The Dow Jones industrial average (^DJI) slipped 133 points, or 0.9 percent, to close at 15,168, the Standard & Poor's 500 index (^GPSC) lost 12 points, or 0.7 percent, to 1,698, and the Nasdaq composite index (^IXIC) gave up 21 points, or 0.6 percent, to 3,794.
The Senate suspended negotiations until House Republicans work out their own plan to proceed on debt limit and government funding. The move comes as the U.S. government pushes closer to its borrowing limit on Oct. 17. Lawmakers have until Thursday to agree to raise the $16.7 trillion U.S. borrowing limit, or the country will commit an unprecedented debt default. Stocks dropped to lows of the day Tuesday on the news.
Markets have largely avoided steep losses due to optimism that lawmakers would agree -- eventually -- to end the partial government shutdown and raise the debt ceiling before time expires. At the same time, volatility in the markets has spiked as the deadline approaches with little obvious progress seen. The market was whipsawed Tuesday as the on-again, off-again talks in Washington left investors wondering whether the U.S. could avoid defaulting.
In economic news, data showed the pace of growth in New York state's manufacturing sector slipped this month to its slowest since May, but business optimism stayed strong.
In commodities trading, benchmark crude for November delivery fell $1.20 to close at $101.21, while gold, which is generally viewed as a safe haven in times of turmoil, nonetheless fell $3.40 to $1,273.
In corporate news, Lockheed Martin (LMT) said it plans to move production of its joint light tactical vehicle to an assembly line at its Camden, Ark., manufacturing plant, a move it says will help make the vehicle more affordable for the U.S. Army and Marine Corps. Prototypes of the vehicles were made at BAE Systems' Sealy, Texas, plant, but BAE plans to close that facility. Lockheed Martin stock fell $1.59 to $125.91 in trading Tuesday.
In earnings news, Citigroup (C) closed 74 cents lower at $48.86, after a wobbly day of ups and downs. The banking giant reported its earnings fell slightly in the third quarter, after a $1 billion drop in revenue from its bond trading business and a slump in mortgage refinancing. Revenue fell to $18.2 billion compared with $19.2 billion a year ago, while earnings amount to $1.02 a share, down from $1.06 a share in the year-ago period.
More Stocks in the News: What to Watch Wednesday: These major companies are scheduled to report quarterly financial results: -Compiled from staff and wire reports.