The U.S. budget debate is holding stocks hostage, as chiefexecutive officers prepare to cut capital spending for the firsttime since 2009 should President Barack Obama and Congress fail toreach an accord.

Expenditures by Standard & Poor's 500 Index companies willfall 1.3 percent in 2013 after three years of growth, according tomore than 10,000 analyst estimates compiled by Bloomberg. Companiesfrom Verizon Communications Inc. to Rockwell Collins Inc. said theydon't plan to boost investment amid concern political leaders willfail to agree on a plan that would avert more than $600 billion ofspending cuts and tax increases that threaten to throw the U.S.into another recession.

Bears say CEO pessimism will sap the rally that boosted theS&P 500 12 percent this year and note that the last timecapital spending declined was at the end of 2008, just beforestocks slumped to a 12-year low. Bulls point out that estimates forcorporate spending show any decline will be limited and say theimproving U.S. economy will lift equity valuations, now 12 percentbelow the 58-year average, Bloomberg data show.