Wall St. cuts losses, ends down as debt vote looms

NEW YORK Mon Aug 1, 2011 6:50pm EDT

Traders work on the floor of the New York Stock Exchange, August 1, 2011. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, August 1, 2011.

Credit: Reuters/Brendan McDermid

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)

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Comments (4)
canrancher wrote:
YEA! More “free money” for wall street! Party on dudes! It doesn’t matter that there are no jobs and no growth in the U.S. We can now print money again!

Aug 01, 2011 8:32am EDT  --  Report as abuse
Mrwawa wrote:
and for limited time..

PRINT YOUR GREEN BACK with HP printer!!!

Aug 01, 2011 11:02am EDT  --  Report as abuse
garilou wrote:
I do not think that the down 1% (at this time) is due to deal uncertainty, but after the joyful jump of the open, realistic investors know that the deal will not “per se” be a stimulant for the economy, it will simply allow the US to pay it’s current bills, and they are not small!

Aug 01, 2011 12:08pm EDT  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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