US stocks fall on debt-ceiling uncertainty
NEW YORK – US stocks fell Tuesday as the deadline for raising the government’s debt ceiling stood just one week away, with no signs of a resolution to the bitter standoff in Washington.
The Dow Jones Industrial Average dropped 91.50 points (0.73 percent) to close at 12,501.30.
The broader S&P 500 shed 5.49 points (0.41 percent) to 1,331.94, while the tech-heavy Nasdaq Composite slipped 2.84 points (0.10 percent) to close at 2,839.96.
Republicans and Democrats remained deadlocked over the debt-ceiling issue amid deep disagreements over tax increases and spending cuts, even as the prospect of a default was unnerving financial markets.
Even if a default is averted, Wall Street is concerned that the standoff may lead to a ratings-agency downgrade of the United States’ top-notch credit rating, which could roil the markets too, analysts said.
“It’s going to come down to what the terms of the deal are,” said Marc Pado, US market strategist for Cantor Fitzgerald.
“The debt ceiling will get lifted. I don’t think that’s the question. It’s really the budget and how Moody’s, Standard and Poor’s and Fitch view the budget — whether it’s enough to keep an AAA rating.”
Weighing on the Dow’s average of 30 blue-chip stocks, shares of 3M plunged 5.4 percent after the conglomerate reported that the March earthquake in Japan and weak demand for LCD televisions had cut into profits.
Ford shares fell 1.8 percent after the US automaker said its second-quarter profit fell 8.0 percent from a year ago and signaled that high commodities prices were taking a toll on earnings.
Top US defense contractor Lockheed Martin gained 1.9 percent after reporting that its second-quarter profits beat analysts’ expectations.
Netflix dropped 5.2 percent after the online film distributor reported disappointing revenues and cut forecasts for US subscriber growth.
US economic data was mixed. Consumer confidence unexpectedly rose in July, the Conference Board reported in its monthly survey.
But the housing market remained depressed, according to the closely watched S&P/Case-Shiller Home Price Index, which showed that home prices fell 4.5 percent in May compared to the same month last year.
Bond prices increased despite the impasse in Washington, which has raised questions about the wisdom of holding US government debt.
The yield on the 10-year Treasury fell to 2.95 percent from 3.00 percent late on Monday, while the 30-year bond dropped to 4.27 percent from 4.32 percent.
Bond prices and yields move in opposite directions.
