Debt cap deadlock sends US stocks lower

NEW YORK: The Washington deadlock over raising the US debt
ceiling sent stocks tumbling on Monday, as the August 2 date to avoid a
government debt default grew closer with no deal in sight.


The Dow Jones Industrial Average closed down 88.36 points (0.70 per cent) at 12,592.80.


The broader S&P 500 lost 7.59 points (0.56 per cent) at
1,337.43, while the tech-heavy Nasdaq Composite shed 16.03 points (0.56
per cent) to stand at 2,842.80.


"US stocks backpedalled right out of the gate today, as heightened
debt concerns on both sides of the Atlantic sent buyers to the
sidelines," said Andrea Kramer of Schaeffer's Investment Research.






"In Europe, Moody's downgrade of Greek debt reminded traders of the
potential ramifications of an extended stalemate on Capitol Hill, as a
failure to up the federal debt ceiling by August 2 could result in a
debt downgrade - or worse, a default - for Uncle Sam."


Democrats and Republicans battled over the weekend and again
throughout Monday over whose debt-and-deficit reduction plan was better,
while investors and economists urged a deal to prevent, at least, a
downgrade of the country's AAA standing as a borrower, and at worst,
Washington being forced to pare 40 percent of its spending and
defaulting on its debt.


Banks were losers as the debt limit cloud darkened over the markets:
Bank of America lost 1.2 per cent, Morgan Stanley gave up 2.5 per cent,
and JPMorgan Chase fell 1.2 per cent.


Dow Chemical added 1.2 per cent on the announcement of a US$20 billion venture with Saudi oil giant Aramco.


BlackBerry maker Research in Motion lost 4.4 per cent after announcing it was cutting 2,000 jobs.


The rising spectre of a downgrade of their AAA grade, or even a payment default, sent Treasury bond prices lower. -- AFP