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Concern over budget sends stocks down

Stocks fell Friday, giving the Standard & Poor’s 500 Index its first weekly drop since August, as concern grew that the budget impasse will hurt economic growth in the world’s largest economy.

The S&P 500 fell 0.4 percent to 1,691.75. The Dow Jones Industrial Average lost 70.06 points, or 0.5 percent, to 15,258.24. About 5.5 billion shares changed hands on U.S. exchanges, 5.7 percent below the three-month average.

The S&P 500 dropped six of the past seven sessions, including a 1.1 percent slide this week, amid the congressional impasse over the budget that threatens to shut down the government.

Congress must also reach a deal to avoid hitting the limit on the government’s ability to borrow.

Treasury Secretary Jacob J. Lew said the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.”

Failure to increase the debt cap could lead to a downgrade of the government’s credit rating.

President Obama said that Congress’ failure to approve funding to keep the government open and an increase in the debt ceiling would have a destabilizing effect on the economy.

A federal shutdown would cut fourth-quarter economic growth by as much as 1.4 percentage points depending on its length, economists said. The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.

Among individual stocks:

• J.C. Penney Co. sank 13 percent after the retailer began selling 84 million shares to raise as much as $932 million in cash.

• International Paper Co. dropped 3.9 percent to $45.44, its eighth retreat in the past nine session to lead declines among raw-materials producers.

• Nike gained 4.7 percent, the most in the Dow, to $73.64. The world’s largest sporting goods company posted fiscal first-quarter profit that topped analysts’ estimates after demand for running and basketball shoes helped North American sales.

• Microsoft Corp. climbed 1.5 percent to $33.27 for the second-biggest gain in the Dow.