FOX Business: The Power to Prosper
With debt negotiations on Capitol Hill reaching an impasse for yet another day, unnerved traders sold relatively risky equities in favor of safer assets, such as gold.
The Dow Jones Industrial Average slid 88.4 points, or 0.7%, to 12,593, the S&P 500 slumped 7.6 points, or 0.56%, to 1,337 and the Nasdaq Composite fell 16 points, or 0.56%, to 2,843. The FOX 50 dipped 5.1 points to 948.
Banks like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:JPM) fell more than 1% amid U.S. debt concerns. Several big-name technology companies like Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT), however, eked out modest gains.
While there were reports last week that President Barack Obama and Speaker of the House John Boehner were nearing a major deal to raise the limit on how much the U.S. can borrow and begin paring back the U.S. deficit, talks fell through after the close of trading on Friday.
Lawmakers continued hashing out plans on Monday, but the divide appeared deep, with a resolution seemingly still far out of reach.
On one side of the aisle, Democrats have been pushing for revenue increases, potentially including tying up tax loopholes and raising taxes on certain income groups to bridge the budget gap. Republicans, meanwhile, have preferred spending cuts, focusing heavily on entitlement programs like Medicare, Medicaid and Social Security.
Two competing plans emerged on Monday, one sponsored by Senate Democratic leader Harry Reid that would cut the budget by $2.7 trillion this year, which garnered an endorsement from the White House. Republican Speaker Boehner proposed a separate plan packed with $1.2 trillion in cuts, with another round of cutting after the 2012 election.
There have also been plans suggested that would simply raise the debt limit sufficiently to fund the government through the 2012 election, and wait to tackle the larger deficit reduction question until a later point.
If Congress is unable to raise the debt ceiling by Aug. 2, the Treasury Department has repeatedly said the country wont be able to pay many of its obligations. Of particular concern to many economists is the potential for the government to fail to service debt that comes due on Aug. 4.
A so-called selective default may prompt credit ratings companies to slash Americas credit rating, which analysts say can cause a significant disruption in global credit markets. Interest rates on Treasury bonds could jump, making lending across the world more expensive, which, in turn, could slow economic recovery.
Indeed, many financial instruments, such as student loans and credit cards are based on U.S. Treasury interest rates.
Gold, often seen as a safe-haven asset during tumultuous times, settled at a non-inflation-adjusted record high on Monday. The precious metal climbed $10.70, or 0.67%, to $1612 a troy ounce. Silver gained 24 cents, or 0.6%, to $40.36 a troy ounce
Market participants are also expected to pay close attention to a slew of corporate earnings on tap this week. Indeed, one third of S&P 500 components report this week, and six of 30 Dow components are set to report.
Corporate profits have largely been seen as positive, sending the markets rallying last week. The broad S&P 500 jumped 2.2% and the Dow Jones Industrial Average climbed 1.6%.
Economic data releases are expected to be light on Monday. A report from the Dallas Federal Reserve showed manufacturing continued to contract slightly in July after plummeting in June.
Energy markets ended the floor session in the red.
Light, sweet crude fell 67 cents, or 0.67%, to $99.20 a barrel. Wholesale RBOB gasoline less than a penny to $3.13 a gallon.
Consumer gasoline prices were little changed overnight, but have been trending higher. A gallon of regular gas costs $3.70 on average nationwide, up from $3.59 last month, and well higher than the $2.74 drivers paid last year, according to the AAA Fuel Gauge report.
In currencies, the euro fell 0.13% against the U.S. dollar, while the greenback edged 0.22% lower against a basket of world currencies.
Kimberly Clark (NYSE:KMB) posted earnings, excluding one-time costs, of $1.18 a share, topping analysts' expectations of $1.14. However, the maker of Kleenex tissues said its full-year earnings would come in toward the lower range of its forecast.
Research in Motion (NASDAQ:RIMM) unveiled plans to cut 2,000 jobs, or 11% of its workforce.
E*Trade Financial (NASDAQ:ETFC) shares got a boost after The Wall Street Journal reported rival TD Ameritrade (NASDAQ:AMTD) is mulling a takeover attempt.
Apple (NASDAQ:AAPL) shares jumped more than 1%, surpassing the $400-mark for the first time ever.
Global shares struggled amid uncertainty over U.S. debt talks.
The English FTSE 100 fell 0.08% to 5,930, the French CAC 40 dipped 0.77% to 3,813 and the German DAX climbed 0.25% to 7,345.
In Asia, the Japanese Nikkei 225 slipped 0.81% to 10,050 and the Chinese Hang Seng shed 0.68% to 22,293.