Stocks declined on Thursday after the leader of Senate Democrats warned the United States appeared headed over the "fiscal cliff" and data showed consumer confidence fell to a four-month low.

With only a few days left before devastating tax hikes and spending cuts go into effect, Senate Majority Leader Harry Reid said about the fiscal cliff, "It looks like where we're headed."

Reid criticized Republicans for refusing to go along with any tax increases as part of a compromise solution with Democrats to avoid the fiscal cliff, which economists warn will knock the economy into recession.

President Barack Obama was flying back to Washington from a Christmas holiday to push for more talks, while the top Republican in Congress planned to speak with House lawmakers to avoid the year-end deadline. Still, gaps remained between the two sides.

The benchmark S&P 500 index is on track for its fourth straight decline and is down 2 percent as negotiations over the budget crisis stalled. A four-day decline would mark the longest losing streak for the index in three months.

The Conference Board, an industry group, said its index of consumer attitudes in December fell to 65.1 as the budget crisis took the steam out of a growing sense of optimism about the economy. The gauge fell more than expected from a downwardly revised 71.5 in November.

Initial claims for unemployment benefits dropped 12,000 to a seasonally adjusted 350,000 last week and the four-week moving average fell to the lowest since March 2008.

"Unfortunately, a term all of us are sick of hearing - the fiscal cliff - appears to be dominating all aspects of the financial market and consumer confidence," said Joe Heider, principal at Rehmann Financial in Cleveland Ohio.

"What has happened here is even though the consumer confidence number had a sharp decline, most people write it off as a result of what is happening in Washington rather than economic reality that is occurring in people's everyday lives."

Treasury Secretary Timothy Geithner announced the first of a series of measures that should push back the government's debt ceiling by around two months.

The Dow Jones industrial average dropped 77.41 points, or 0.59 percent, to 13,037.18. The Standard & Poor's 500 Index lost 9.71 points, or 0.68 percent, to 1,410.12. The Nasdaq Composite Index fell 18.36 points, or 0.61 percent, to 2,971.80.

Marvell Technology Group fell 3.4 percent to $7.15 after it said it would seek to overturn a jury's finding of patent infringement. The stock had fallen more than 10 percent in the prior session after a federal jury found the company infringed two patents held by Carnegie Mellon University and ordered the chipmaker to pay $1.17 billion in damages.

The PHLX semiconductor index lost 0.7 percent.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)