Dow drops for 5th day as debt fears loom (ext)

NEW YORK (CNNMoney) -- U.S. stocks lost steam in the afternoon, pushing the Dow lower for the fifth straight session, as investors remain worried about the impending debt ceiling deadline.

The Dow Jones industrial average (INDU) dropped 62 points, or 0.5%.

The S&P 500 (SPX) fell 4 points, or 0.3%. The Nasdaq composite (COMP) managed to hold on to gains, rising 1 point, or 0.1%.

Earlier in the day, the Dow was up almost 0.7%, while the S&P 500 had climbed 0.9%. The Nasdaq had popped nearly 1.3%. Investors welcomed encouraging news from the job and housing markets, but are still looking for Congress to strike a deal on the debt ceiling.

The softness in the afternoon came as the House began to debate the debt ceiling plan favored by Republicans. Even if the measure passes when the House votes later Thursday, it is expected to die in the Senate, and barring that, President Obama has threatened to veto it.

"The market is sending a message that Washington needs to get its collective act together," said Tom Schrader, managing director at Stifel Nicolaus. "I don't think that the U.S. will default, but politicians are using scare tactics and investors are nervous."

Schrader said trading will remain choppy, as lawmakers continue to squabble over raising the debt ceiling and cutting the the nation's deficit, but he expects the Treasury and equity markets to rally once the debate is resolved.

The Labor Department reported 398,000 Americans filed for initial unemployment benefits last week -- the first time claims have dropped below 400,000 in more than three months. Economists polled by Briefing.com had expected 415,000 claims.

The National Association of Realtors said pending home sales rose 2.4% in June. Sales were forecast to have slipped 3% last month, after jumping 8.2% in May.

Investors are also looking ahead to Friday's second-quarter GDP report. The government will report how much the economy expanded -- and don't expect much good news.

The dollar strengthened against the euro, but weakened against the British pound and Japanese yen.

Oil for September delivery rose 4 cents to settle at $97.44 a barrel.

Gold futures for August delivery slipped $1.70 to settle at $1,613.40 an ounce.