U.S. stocks declined on Thursday, with the benchmark indexes recording their worst session since July 31, as Apple tumbled on glitches tied to its new smartphone and as investors considered a proposal in Russia that would let its courts seize foreign assets.
"That would signal a threat from the Kremlin that the Russian-U.S.-Europe conflict economically might take a turn for the worse. They are signaling that unless concessions or negotiations take place, we're prepared to do this," said Jim Russell, senior equity strategist for US Bank Wealth Management.
"It's a turn for the worse, it's an unwelcome signaling from the Kremlin that this, a limitation on capital flows to Russia, is a possibility," Russell said.
Reuters reported the draft law, submitted to Russia's parliament on Wednesday by a pro-Kremlin deputy, would also allow state compensation for those whose assets were taken in foreign jurisdictions. The proposed measure comes after Italy froze luxury properties owned by a longtime friend of President Vladimir Putin, Bloomberg reported.
The CBOE Volatility Index, a measure of investor uncertainty, jumped 17.9 percent to 15.64; the price of gold turned higher and Treasuries rallied.
Apple dropped 3.8 percent as the iPhone maker contended with glitches in the latest version of its operating system. Twitter and Pandora Media led declines among Internet firms. The Russell 2000 Index of smaller companies dropped 1.3 percent.
"It's a sell what is expensive kind of move. Small caps did especially well last year and for the first half of 2014, so it's more of a valuation correction. This sort of internal rotation is a constructive adjustment to getting valuations to a more rational level," Russell said.
Economic reports had orders for long-lasting goods falling 18.2 percent in August, while applications for unemployment benefits rose by 12,000 to a seasonally adjusted 293,000 last week, less than the 300,000 estimate.
A third number came from financial-data firm Markit, which said its initial services Purchasing Managers Index for September came in at 58.5 versus an expected 59.0.