August 2, 2011 / 5:41 PM / 8 years ago

US STOCKS-Wall St drops even as Congress passes debt deal

* Measure to raise debt limit on way for Obama’s signature

* Pfizer, ADM fall after reporting results

* Dow off 1.1 pct, S&P off 1.4 pct, Nasdaq 1.3 pct

* For up-to-the-minute market news see [STXNEWS/US] (Updates to afternoon)

By Caroline Valetkevitch

NEW YORK, Aug 2 (Reuters) - U.S. stocks dropped on Tuesday on worries about a possible downgrade of the United States’ top credit rating and signs of economic weakness even as Congress passed a bill to avoid a debt default.

Investors seemed to find nothing to cheer after the U.S. Senate agreed to the House-passed deal to raise the debt ceiling because of the possibility it still would not stave off a downgrade of the U.S. government’s triple-A rating.

But shortly after the vote, Fitch Ratings said the agreement to raise the U.S. borrowing capacity means the risk of a sovereign default is “extremely low” and commensurate with a AAA rating. For details, see [ID:nN1E771172]

The S&P 500 was down for a seventh day and was on track for its longest down streak since October 2008.

“I would have expected to see a (stocks) relief rally almost immediately upon passage in the Senate. It hasn’t happened,” said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.

The Dow Jones industrial average .DJI was down 131.91 points, or 1.09 percent, at 12,000.58. The Standard & Poor's 500 Index .SPX was down 17.62 points, or 1.37 percent, at 1,269.32. The Nasdaq Composite Index .IXIC was down 35.05 points, or 1.28 percent, at 2,709.56.

“Investors have made the shift from Washington to what I’m calling economic realities,” Dickson said.

A government report showed U.S. consumer spending fell unexpectedly in June for the first decline in nearly two years as incomes barely rose. [ID:nN1E7710A7]

On Monday data on U.S. factories for July suggested the economy was in a stall. The government’s key monthly jobs report is due Friday.

Industrial and consumer discretionary shares were among hardest hit, with the S&P industrial index .GSPI down more than 2 percent. (Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

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