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Wall Street Tumbles on Debt Woes, Weaker Economy
Jul 28,2011 10:35CST
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Source:SMM
U.S. stocks declined for the third consecutive day on Wednesday, with the Dow Jones Industrial Average down nearly 200 points.

NEW YORK, Jul. 28 -- U.S. stocks declined for the third consecutive day on Wednesday, with the Dow Jones Industrial Average down nearly 200 points, amid continuing debt deadlocks and softer economic data.

The sell off was across the board, with technology and industrial stocks leading the way. The broader S&P 500 breached its 50-day moving average of 1,310, spurring more technical selling. The Dow Jones industrial average lost 198.75 points, or 1. 59 percent, to 12,302.55. The Standard & Poor's 500 tumbled 27.05 points, or 2.03 percent, to 1,304.89. The Nasdaq Composite Index plunged 75.17 points, or 2.65 percent, to 2,764.79.

Adding to uncertainties, the nonpartisan Congressional Budget Office said on Wednesday that budget plans put forth by Senate Democrats and House Republicans wouldn't reduce the deficit by as much as promised, forcing House Speaker John Boehner to make revisions and postpone a vote scheduled on Wednesday.

Meanwhile, Democrats indicated lawmakers were no closer to reaching a compromise on the federal debt limit, fueling fears on the market.

With the clock ticking and still no deal reached on raising the debt limits in Washington, investors were more and more worried about a rating downgrade, or even an actual default on the U.S. debt.

Moreover, investors believed that even if a default is avoided, the U.S. government's triple-A rating might still be downgraded, raising borrowing costs during the course of economic recovery.

Besides the debt woes in Washington, Wednesday's economic data showed the U.S. economic growth is losing momentum.

According to the Federal Reserve's Beige Book, economic growth in the U.S. moderated in June and early July while conditions in the labor market "remained soft" across much of the country.

Meanwhile, the Commerce Department said before the opening bell that orders for durable goods unexpectedly fell 2.1 percent in June, showing companies were less confident about the economic outlook.

Separately, the Federal Reserve Bank of Chicago said that manufacturing output in the Midwest was weaker in June as declines in resource and auto sectors overshadowed higher production of steel and machinery.

Earnings came in still relatively strong, limiting some losses. Boeing was among the only a few stocks in the Dow composites to end in positive territory after the aerospace and defense company reported higher-than-expected second-quarter earnings and raising its full-year outlook for the second time because of stronger company-wide performance.

 

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