The Dow Jones industrial average fell on Thursday as investors assessed the possibility of the government shutting down at the end of the week.
The 30-stock index closed 97.84 points lower at 26,017.81 after falling 168.33 points at its session lows. The S&P 500 alternated between gains and losses throughout the session before closing 0.2 percent lower at 2,798.03.
Congress needs to pass a spending bill by the end of Friday to avoid a government shutdown. Historically, a government shutdown has led to a short-term pullback in the stock market.
"This is definitely related to the shutdown," said Larry McDonald, head of the U.S. macro strategies at ACG Analytics and creator of The Bear Traps Report. "The chances of a shutdown have increased in the past few weeks, but the market's been ignoring it."
The Dow and S&P 500 posted record closes on Wednesday, shaking off a sharp intraday reversal in the previous session. The Dow closed above 26,000 for the first time, while the S&P 500 finished above 2,800 for the first time.
"Congress trying to avert a government shutdown is a concern," said Anthony Conroy, president at Abel Noser. "People are also taking a bit off the table. We've had record after record after record."
Stocks are off to a strong start this year. The Dow, S&P 500 and Nasdaq composite are all up at least 4.8 percent for 2018, adding to last year's strong gains.
Equities have been boosted this year by optimism in the U.S. economy and expectations for a strong earnings season. Thus far, the earnings season is off to a good start.
Of the S&P 500 companies that had reported as of Wednesday morning, 78 percent have surpassed earnings-per-share estimates while 89 percent have beaten expectations on the top line, according to Nick Raich, CEO of The Earnings Scout.
Morgan Stanley and BB&T Corp. both reported better-than-expected earnings and revenue on Thursday. Their shares rose.
"In our view, the market has not adjusted expectations up enough to reflect the current tailwinds for economic and EPS growth, especially given the recent tax legislation," Tony Dwyer, chief market strategist at Canaccord Genuity, said in a note Wednesday. Dwyer was referring to the tax bill signed by President Donald Trump last month, which cuts the corporate tax rate to 21 percent from 35 percent.
Elsewhere in corporate news, General Electric shares hit their lowest level in six years, breaking below $17 for the first time since December 2011.
The benchmark 10-year yield rose to trade at 2.62 percent, near a multi-year high.