U.S. stocks fell for a fourth day amid concerns over budget talks and economic growth as investors weighed prospects for easing tensions in the Middle East.

Red Hat Inc. slumped 12 percent after billings at the largest seller of the Linux operating system trailed estimates. Homebuilders gained 2.3 percent as a group after a report showed home prices increased by the most in more than seven years and Lennar Corp.?s profit beat analyst estimates. Applied Materials Inc. advanced 9.1 percent after agreeing to buy Tokyo Electron Ltd. for about $9.39 billion in stock.

The Standard & Poor?s 500 Index fell 0.3 percent to 1,697.42 at 4 p.m. in New York. The Dow Jones Industrial Average lost 66.79 points, or 0.4 percent, to 15,334.59. About 6 billion shares changed hands on U.S. exchanges, in line with the three-month average.

The market is ?riding waves of news, both good and bad,? Malcolm Polley, the chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in a telephone interview. His firm manages $1.1 billion. ?The market is very dependent on macro news.?

The S& P 500 initially fell as much as 0.4 percent after the Conference Board?s index of U.S. consumer confidence slumped in September to a four-month low. A separate report showed a gauge of manufacturing in the region covered by the Federal Reserve Bank of Richmond shrank in September.

?Meaningful Agreement?

The equity benchmark index erased earlier losses as President Barack Obama said recent overtures from Iran may offer a basis for a ?meaningful agreement? to resolve the confrontation over the Persian Gulf nation?s nuclear program, one of the primary sources of instability in the Middle East. Iranian officials told the U.S. that the time isn?t right for direct contact between the two countries? leaders.

Stocks turned lower in the last 30 minutes of trading as investors watched the debate in Washington over spending cuts. U.S. Senate Democrats offered a new proposal that funds the government through Nov. 15, complicating efforts to avoid a government shutdown in a week as Republican Senator Ted Cruz began an extended speech in opposition to funding for the health-care law.

?We may have a couple few weeks where there is still lingering concern over the Fed along with very much headline risk around the budget ceiling debate,? David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages more than $115 billion. ?Over the short term, we would see the market continue to either muddle through or consolidate before we hit earnings season.?

Stimulus Debate

The S& P 500 has declined 1.6 percent over four days after reaching an all-time high of 1,725.52 as the Federal Reserve refrained from cutting stimulus. The Federal Open Market Committee said after its Sept. 17-18 meeting that it wants more evidence of an economic recovery before paring its $85 billion of monthly asset purchases, surprising economists who had forecast a reduction. The S& P 500 has gained 5.7 percent this quarter and is up about 19 percent for the year.

Fed Bank of New York President William C. Dudley said today the central bank may reduce the pace of its quantitative easing program in 2013 depending on the economy?s performance.

?If the economy were behaving in a way aligned with the Fed?s June forecast, then it?s certainly likely that the Fed would begin to taper later this year,? Dudley said in an interview with CNBC. ?I certainly wouldn?t want to rule it out. But it depends on the data.?

?Different Views?

Stocks fell on Sept. 20 as Fed Bank of St. Louis President James Bullard said policy makers may decide to reduce their monthly bond purchases at the meeting in October.

?There are so many different views from the Fed itself and there is no one voice that seems to be articulating a common message,? Mark Freeman, who oversees about $15.8 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said by phone. ?What they ultimately created is uncertainty and that?s never a positive for the market.?

The Chicago Board Options Exchange Volatility Index, the gauge of S& P 500 options prices known as the VIX, slipped 1.6 percent to 14.08, extending its drop for the year to 22 percent.

Seven out of 10 S& P 500 groups fell as telephone and consumer-staples companies declined more than 0.7 percent for the worst performance.

Red Hat tumbled 12 percent, the most in the S& P 500, to $46.73. Billings, a predictor of future revenue, rose 8 percent in the second quarter from a year earlier to $376 million. Analysts at CLSA had projected an increase of 17 percent, and Stifel Nicolaus & Co. predicted 14 percent growth.

Stock Chart for Apple Inc (AAPL)

Emerging-market stocks rose after a report showed that a gauge of Chinese manufacturing increased to a six-month high. Technology companies climbed, led by Apple Inc. (AAPL)?s suppliers, amid optimism over new iPhone sales.

The MSCI Emerging Markets Index added 0.3 percent to 1,016.30, extending a three-week gain. The Shanghai Composite Index advanced 1.3 percent as GoerTek Inc. (002241), an Apple supplier, surged the most in a month. Brazil?s Ibovespa (IBOV) snapped a two-day slide as Banco Santander Brasil SA led gains in financial stocks after Citigroup Inc. said it?s ?bullish? on the country?s banks. Indonesia?s rupiah paced losses in currencies on speculation local companies are boosting dollar purchases.

Stocks advanced amid optimism that China?s economic growth is picking up, boosting Premier Li Keqiang?s odds of meeting the year?s 7.5 percent expansion goal. The preliminary reading of 51.2 for a Purchasing Managers? Index released today by HSBC Holdings Plc and Markit Economics compared with a 50.9 median estimate from 14 economists surveyed by Bloomberg News.

?The number was very good, much better than expected,? Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, said in an interview at Bloomberg?s headquarters in New York. His firm oversees about $1.3 trillion. ?We had been expecting China to do better in the second half, and that?s coming true.?

Technology and consumer discretionary shares led gains among the 10 industries in the MSCI Emerging Markets Index. The measure for developing markets trimmed this year?s decline to 3.7 percent, trading at 10.7 times projected earnings, according to data compiled by Bloomberg. That trails the 14 valuation of the MSCI World Index.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 0.4 percent to $42.23. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slipped 2 percent to 23.09.

Brazil?s Ibovespa gained as Santander added 2.9 percent. The benchmark gauge will reach 60,000 by the end of the year and to 64,000 in 2014, boosted by the U.S. Federal Reserve?s decision to delay tapering of its bond-buying program and by better-than-forecast economic data in Brazil, Citigroup analysts wrote in a report.

Russian stocks declined for a second day as JPMorgan Chase& Co. reduced the nation?s equities to the equivalent of sell on declining crude prices. OAO Rosneft, Russia?s biggest oil producer, dropped 1.3 percent. JPMorgan upgraded equities in Turkey, Peru and South Africa, saying the Fed?s decision to keep monetary stimulus intact would spur emerging-market stocks for the rest of the year.

?Happy Days?

?The Fed is allowing investors to ?temporarily? relive the happy days of QE-driven EM bonds and equities,? JPMorgan said in the report. ?The switch to bullish EM equities was built on bearish positioning and improving cyclical data in EM.?

Chinese shares climbed the most in two weeks as the bourse resumed trading after a two-day holiday last week. GoerTek jumped 6.2 percent, the most since Aug. 8. Apple sold 9 million iPhones in the weekend debut of two new models, almost double the previous record, and predicted that quarterly revenue would be at the high end of its previously projected range.

The Taiex Index rallied to the highest level since May 29, led by Taiwan Semiconductor Manufacturing Co.

Indian (SENSEX) stocks posted the biggest two-day loss in a month on concern the central bank may take more steps to quell inflation after unexpectedly increased borrowing costs last week. State Bank of India plunged 5.3 percent, sending the S& P BSE Bankex to its biggest retreat in three weeks.

Indonesia?s rupiah fell the most in more than a week amid speculation local companies are boosting dollar purchases to meet month-end debt and import payments.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 317 basis points, according to JPMorgan Chase & Co.