Wall St. cuts losses, ends down as debt vote looms
NEW YORK (Reuters) - The S&P 500 fell for a sixth day on Monday as time runs out for the government to pass a deal to avoid default and the economy showed further signs of stalling.
The market pared losses late in the day before Congress was expected to vote on Monday on a debt deal backed by the White House, which includes spending cuts of $2.4 trillion over 10 years.
The deadline for a deal, which includes raising the U.S. borrowing limit, is Tuesday at midnight.
"It's an on-again, off-again market, and it reflects the on-again, off-again nature of these debt ceiling deliberations," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.
"Investors now believe that the debt limit will be raised, that the vote will be positive in the Senate and positive in the House, but there's still a bit of skepticism or caution."
Stocks fell after the Institute for Supply Management said the U.S. manufacturing sector grew at the slowest pace in two years in July. The ISM report followed similarly weak reports from much of Asia and Europe.
The defense and health care sectors, which would be subject to U.S. budget cuts if a deal is not reached, were among the hardest hit. The iShares Dow Jones US aerospace and defense exchange traded fund fell 1.1 percent while S&P's healthcare index lost 1.7 percent.
Healthcare stocks also fell after the Centers for Medicare & Medicaid Services said Friday that it will cut payments to skilled nursing facilities by 11 percent. Kindred Healthcare fell 30 percent and Skilled Healthcare lost more than 43 percent.
The Dow Jones industrial average dropped 10.75 points, or 0.09 percent, to 12,132.49. The Standard & Poor's 500 Index fell 5.34 points, or 0.41 percent, to 1,286.94. The Nasdaq Composite Index lost 11.77 points, or 0.43 percent, to 2,744.61.
"Today's trading has exposed the market. It apparently was hiding behind the 'debt ceiling' curtain, but now that that has been pulled back, we find that there are other problems -- namely, the economy," said Larry McMillan, president of McMillan Analysis Corp.
The S&P 500 rallied back above its 200-day after dipping sharply below that. The level has acted as strong support over the last two months and the fact that S&P 500 was able to rally back above it was a comfort to investors.
"The S&P which sliced through the 200-day moving average at 1,285, has taken that back in the last half hour (of trading)," said Elliot Spar, market strategist at Stifel, Nicolaus & Co in Shrewsbury, New Jersey, noting that as a sign of underlying resilience.
Stocks traded in a wide range. A rally in equity markets that began in Asia last night on optimism over a debt agreement eroded as the outcome seemed to struggle throughout Monday to bring the deal to a close.
If lawmakers approve the debt deal before the Tuesday deadline, it may end months of debate over whether the United States can avoid a debt default.
Even though a default was considered unlikely by many investors, the threat of a credit rating downgrade continued to weigh on sentiment after Wall Street marked its worst week in a year last week.
Shares of United Health slid 3.2 percent to $48.02 while Humana Inc dropped 3 percent to $72.36, despite Humana reporting a higher-than-expected second-quarter profit.
Among other health-care stocks, shares of Pfizer shed 1.2 percent at $19.01.
Some 8.3 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of around 7.48 billion.
Advancers outweighed decliners on the NYSE by about 9 to 8, while on Nasdaq losers outpaced winners by about 5 to 4.
(Reporting by Edward Krudy; Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)
- Judge rejects strict limits on U.S. nurse who treated Ebola patients |
- Test flight of Virgin Galactic spaceship ends in fatal crash in California
- Suspect in Pennsylvania police ambush denied bail |
- Dow, S&P 500 end at record highs; BoJ move adds fuel to rally |
- Judge issues order enforcing Ebola isolation of defiant Maine nurse