Stocks dropped for a third straight day on Wednesday, with the Nasdaq off 2 percent, as a political deadlock over the debt ceiling and a decline in durable goods orders kept investors away from risky assets.

The S&P 500 .SPX has lost about 2 percent this week on worries of a possible U.S. debt downgrade.

Corporate earnings have been coming in relatively weak in recent days, compared to the beginning of the earnings season, also weighing on the market.

"We started off the earnings season with a bang, but the ones that we've been getting in the past few days, mostly industrial ones, have been on the light side, and often pointing to an economic slowdown. That's triggering an early morning selloff," said Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

The Dow Jones industrial average .DJI slid 127.11 points, or 1.02 percent, at 12,374.19. The Standard & Poor's 500 Index .SPX was down 18.79 points, or 1.41 percent, at 1,313.15. The Nasdaq Composite Index .IXIC tumbled 57.29 points, or 2.02 percent, at 2,782.67.

U.S. industrial conglomerate Emerson Electric Co (EMR.N) said its order growth moderated in the three months to June, and warned that U.S. and European economies have "clearly slowed" in the past two months. The stock fell 7.1 percent to $50.22.

Juniper Networks Inc (JNPR.N) tumbled 20.4 percent to $24.80 after the company warned late Tuesday its second-quarter results would miss expectations, citing weak sales to telecommunications providers.

The PHLX semiconductor index .SOX fell 3.6 percent, its worst drop since February 2.

But Amazon.com Inc (AMZN.O) was up 5 percent at $224.73 a day after the online retailer reported a surge in quarterly revenue.

A Republican plan to cut the U.S. deficit met stiff opposition, reducing the chances of a late compromise to avoid a default.

Further pressuring the market, new orders for long-lasting U.S. manufactured goods fell unexpectedly in June, and a gauge of business spending plans slipped.