Stocks faded in the afternoon on Thursday to end mostly lower, with investors skeptical a key vote by Congress would lead to a deal to avoid a default.

The S&P 500 fell for a fourth straight day as buyers kept to the sidelines while lawmakers tried to hash out an agreement on the deficit.

A vote on a Republican-led bill to raise the debt limit was expected after the close of trading on Thursday in the U.S. House of Representatives. The Democratic-controlled Senate is crafting a competing bill, and Democratic leaders have said the House bill will be defeated in the Senate.

During the course of the day, it became clear that even if (Republican House Speaker John) Boehner does get the vote, when it's turned over to the Senate, the Senate is going to reject it. That seems to be the reason for the selling into strength, said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Analysts said dissension among the ranks of lawmakers has also made investors less certain that a deal can happen.

The wrangling over the U.S. deficit has boosted volatility as stocks have fallen. The S&P 500 is down 3.3 percent on the week and the market's fear gauge, the CBOE Volatility Index <.VIX>, rose above 23, the highest since mid-June.

The lack of leadership has optimism flying at a very low altitude... It's basically leaving investors very skittish, said Steve Goldman, market strategist with Weeden & Co in Greenwich, Connecticut.

Stocks got an early lift from a dip in jobless claims and strong pending U.S. home sales data, a day after the S&P 500 posted its biggest fall in eight weeks.

Among gainers, Green Mountain Coffee Roasters jumped 16.4 percent to $102.57 after the company said late Wednesday its third-quarter sales rose 18 percent. Green Mountain was the top percentage gainer on the Nasdaq, which ended slightly higher.

The Dow Jones industrial average <.DJI> ended down 62.44 points, or 0.51 percent, at 12,240.11. The Standard & Poor's 500 Index <.SPX> was down 4.22 points, or 0.32 percent, at 1,300.67. The Nasdaq Composite Index <.IXIC> finished up 1.46 points, or 0.05 percent, at 2,766.25.

Exxon Mobil Corp , the world's largest publicly traded oil company, however, reported results that fell short of expectations and its stock fell 2.2 percent to $81.46.

Also on the downside were shares of Internet delivery company Akamai Technologies , a day after it lowered its revenue growth target.

Buoying the market early in the day, pending sales of existing U.S. homes unexpectedly rose 2.4 percent in June from May and was up sharply from a year ago.

New weekly claims for unemployment benefits fell below 400,000 for the first time since early April.

Some 7.67 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq, roughly in line with the daily average of 7.47 billion.

Decliners outweighed advancers on the NYSE by about 3 to 2, while on Nasdaq losers were about even with winners.

It's institutional selling. It may be related to mutual fund redemptions, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

(Additional reporting by Ashley Lau; Editing by Kenneth Barry)