Wall St falls on Fed officials' comments, Washington fears

US stocks declined for a third straight session on Monday as Federal Reserve officials suggested the Fed could still begin scaling back its stimulus later this year.

A looming political deadline in Washington added to pressure on the market, where losses over the past three sessions have erased the S&P 500's 1.2 percent gain last Wednesday when the Fed decided against reducing its economic stimulus measures.

William Dudley, president of the Federal Reserve Bank of New York, said in a speech the timeline that Fed Chairman Ben Bernanke articulated in June for scaling back the central bank's stimulus measures is "still very much intact," as long as the economy keeps improving.

At a separate event, Dallas Fed President Richard Fisher warned that by standing pat the Fed had hurt its credibility and said he had urged colleagues to support a USD 10 billion reduction in the Fed's bond-buying program at last week's meeting.

Banks led the S&P 500's decline, with Citigroup down 3.2 percent at USD 49.57, a day after the Financial Times reported Citi had a significant drop in trading revenue during the third quarter. The S&P financial index lost 1.5 percent. Shares of JPMorgan Chase were down 2.5 percent at USD 51.46.

The Fed last week decided against reducing asset purchases from the current USD 85-billion monthly pace, surprising many investors who had anticipated a change in policy.

"They have cast uncertainty, and the uncertainty more than overshadows the fact that they've left a more stimulative policy in place," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco.

The Dow Jones industrial average was down 49.71 points, or 0.32 percent, at 15,401.38. The Standard & Poor's 500 Index was down 8.07 points, or 0.47 percent, at 1,701.84. The Nasdaq Composite Index was down 9.44 points, or 0.25 percent, at 3,765.29.

The S&P 500 is on track for a gain of 4.2 percent for September and is up 19.3 percent for the year so far.

Adding to concerns was the approaching Oct 1 deadline for Congress to avoid a government shutdown as lawmakers negotiate ahead of the end of the fiscal year.

"I think investors are a little more concerned about the debate going on in Washington and the volatility that may create over the next few weeks," said Michael Sheldon, chief market strategist of RDM Financial in Westport, Connecticut.

US-listed shares of Blackberry closed up 1.1 percent at USD 8.82 after a consortium led by Fairfax Financial offered to buy the Canadian smartphone maker for USD 4.7 billion.

Apple shares were a bright spot, up 5 percent to USD 490.64, giving the S&P 500 its biggest boost. Apple sold 9 million iPhone 5s and iPhone 5c models since their launch on Friday.

A flood of new orders gave a boost to European and Chinese firms in September, according to surveys that added to evidence that the global economy is healing, but US factory activity lost some momentum.

The widely followed Dow Jones industrial average now includes three new components. Goldman Sachs, Visa and Nike on Monday replaced Bank of America, Hewlett-Packard and Alcoa.

Shares of Goldman fell 2.7 percent to USD 165.25, while Visa declined 1.3 percent to USD 196.24, and Nike dipped 0.6 percent to USD 68.98. HP eased 0.1 percent to USD 21.20, Alcoa slipped 0.1 percent to USD 8.28 and shares of Bank of America dropped 2.1 percent to USD 14.14.

Volume totaled about 5.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.3 billion this year.

Decliners beat advancers on the NYSE by about 1.4 to 1 and on the Nasdaq by about 1.3 to 1.