Stocks Slip After Factory Data Overshadow Debt Progress
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The blue chips ended slightly lower, falling for the seventh-straight session, after an unexpectedly weak manufacturing report offset optimism over progress on raising the U.S. debt ceiling.
Today's Markets
The Dow Jones Industrial Average fell 10.8 points, or 0.09%, to 12,132, the S&P 500 dipped 5.3 points, or 0.41%, to 1,287 and the Nasdaq Composite slid 11.8 points, or 0.43%, to 2,745. The FOX 50 slipped 0.42 point to 918.
Trading was tumultuous on Monday, with the Dow swinging 284 points from its highs to its lows of the day.
The Institute for Supply Management's gauge of manufacturing activity fell to 50.9 in July, indicating a very slow pace of expansion, from 55.3 the prior month. The reading was the lowest since July 2009. Economists expected a considerably smaller decline to 54.9.
"The depth of the decline is certainly disconcerting," wrote Daniel Greenhaus, chief global strategist at BTIG, adding that these data point to a slower pace of economic growth for the second half of the year than previously anticipated.
Construction spending climbed 0.2% in June, according to the Commerce Department, which came in just slightly higher than expectations.
Traders were also paying close attention to developments in Washington, D.C..
The Democratic-controlled Senate is expected to pass a White House-backed debt bill as early as Monday.
Click here to read the bill...
The deal would raise the U.S. borrowing limit to $14.3 trillion and shave more than $2.1 trillion from the deficit over the next ten years. The law would cut the deficit in two stages: a $900 billion upfront cut, followed by a $1.5 trillion reduction made special joint comittee. However, it remained unclear if a compromise bill would be able to pass the Republican-controlled House of Representatives.
Lawmakers have been battling on Capitol Hill and in the halls of the White House for months in a bid to find a compromise. An ideological divide on both sides of the aisle restrained progress and prevented lawmakers from developing a plan that could garner bi-partisan approval and pass through both the House and the Senate. Indeed, uncertainty over whether lawmakers would be able to craft a debt package rattled the markets last week, with the Dow tumbling 4% -- the worst performance in a year.
"Investors have breathed a collective sigh of relief that the risk of default has been avoided," wrote David Jones, chief market strategist at IG Index, a London-based trading company. Jones notes, however, that there is still a potential for the deal to fall through, and that " traders likely to keep a wary eye" on Congress.
The Treasury Department has said that the U.S. will hit its borrowing limit on Tuesday, at which point it may not be able to service American debt, pay checks to millions of Americans that rely on government benefits, and potentially have to significantly cut back on spending. Additionally, ratings companies have said repeatedly that they will slash the country's top-notch credit ratings if a deal that includes a credible deficit-reduction plan is not reached.
Either a downgrade, or worse, a default, of American debt can have significant economic consequences, analysts have said.
In currencies, the dollar jumped 0.71% against a basket of world currencies, while the euro fell 0.7% against the greenback.
Energy followed equities into the red.
Light, sweet crude fell 81 cents, or 0.85%, to $94.89 a barrel. Wholesale RBOB gasoline slipped less than a penny to $3.05 a gallon.
Prices at the pump were stable overnight, but moved higher last week. A gallon of regular at the pump cost $3.71 on average nationwide, up from $3.56 last month, and well higher than the $2.74 drivers paid last year, according to the AAA Fuel Gauge report.
Gold, which has hit record highs several times over the last two weeks amid uncertainty on Wall Street, was modestly lower. The precious metal fell $9.50, or 0.58%, to $1,622 a troy ounce.
Corporate News
Humana (NYSE:HUM) posted second-quarter earning of $2.71 a share, zipping past analysts' estimates of $2.06 a share. The health insurer saw its sales increase 8% to $9.3 billion, which was in line with forecasts.
HSBC (NYSE:HBC), Europe's biggest bank, unveiled that it would slash 30,000 jobs, or 10% of its workforce.
Foreign Markets
The English FTSE 100 slumped 0.7% to 5,774, the French CAC 40 tumbled 2.3% to 3,588 and the German DAX plummeted 2.9% to 6,954.
In Asia, the Japanese Nikkei 225 climbed 1.3% to 9,965 and the Chinese Hang Seng rose 0.99% to 22,663.