Meanwhile, Reuters reported on Wednesday that Senior Republican Jeff Sessions said there would be no shutdown or government default. House speaker John Boehner said a Republican proposal was coming that would tie federal government spending cuts to a U.S. debt limit increase.
(Read more: Brawl in US Congress—should the world care?)
Also keeping traders on edge, Chicago Fed president Charles Evans said the central bank could start reducing its asset purchases this year based on economic forecasts but the decision to wind back stimulus may be delayed to next year.
Meanwhile, New York Fed President William Dudley reiterated his stance for the central bank's bond-buying program, saying the labor market is not yet healthy and inflation should firm in the months ahead.
And Minneapolis Fed president Narayana Kocherlakota said the next Fed chairman will need to resist the temptation to wind down the central bank's monetary stimulus in the face of rising criticism of the super-easy policies. Ben Bernanke's term as Fed chairman ends in January and current Vice Chair Janet Yellen is widely seen to be his likely successor.
On the economic front, consumer sentiment fell to 77.5 in September, hitting its lowest in nearly five months, according to the Thomson Reuters/Unversity of Michigan's final reading on the overall index. The reading lower than the 78.0 economists had expected in a Reuters poll, but still higher than a mid-month preliminary reading of 76.8.
And household spending ticked up 0.3 percent in August, according to the Commerce Department.
JCPenney plunged sharply to lead the S&P 500 laggards after the retailer priced 84 million shares of common stock at $9.65 each through Goldman Sachs. At least three brokerages slashed their price target on the company.
BlackBerry posted a quarterly loss of nearly $1 billion, as previously warned, which included a writedown for unsold Z10 smartphones, the company's latest device that the firm had hoped would reverse its struggling business. Earlier this week, BlackBerry signed a tentative $9-a-share agreement to be acquired by a consortium led by Fairfax Financial, its largest shareholder.
(Read more: Canada's Harper suggests BlackBerry deal review)
Nike spiked higher after the newly-minted Dow component posted quarterly results that exceeded Wall Street expectations, helped by strong sales in gains in North America and Europe. In addition, at least seven brokerages upped their price targets on the sports apparel retailer. Smaller rivals Under Armor and Foot Locker also rallied.
Lumber Liquidators dropped after a report that federal authorities executed a search warrant at the hardwood flooring retailer's headquarters.