US stocks : Dow down 0.2 pct
watching Friday's meeting at the White House between President Barack Obama and Republican and Democratic leaders of Congress over deficit reduction for any sign the two sides are moving closer.
The memory of last year's political impasse over raising the debt ceiling has also made analysts nervous.
(There is) uncertainty of whether we're going to have a functioning government going forward. That is a weight that sits on markets right now, said Troy Logan, managing director and senior economist at Warren Financial Service in Exton, Pennsylvania.
Even if the economy avoids an outright recession, there are fears a lengthy political dispute could sap business investment and consumer spending.
The Dow Jones industrial average slipped 28.49 points, or 0.23 percent, to 12,542.46. The Standard & Poor's 500 Index lost 2.16 points, or 0.16 percent, to 1,353.33. The Nasdaq Composite Index was off 9.87 points, or 0.35 percent, to 2,836.94.
The S&P 500 sunk to a 3 1/2-month closing low and was well below its 200-day moving average, which it pierced last week.
Data on Thursday showed new claims for unemployment benefits surged last week, while factory activity in the mid-Atlantic region unexpectedly shrank in November as the economy felt the effects of superstorm Sandy.
A flare-up in violence in the Middle East added to market unease as Israeli warplanes bombed targets in and around Gaza city for a second day, while two rockets fired from the Gaza Strip targeted Tel Aviv.
Apple Inc shares dragged the Nasdaq lower, falling 2.1 percent to $525.62 and down about 25 percent since
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