U.S. stocks fell, dragging the Standard & Poor’s 500 Index down the most in almost two months, as lawmakers indicated they were no closer to reaching a compromise on the federal debt limit. Technology and industrial stocks led declines among 10 S&P 500 groups. Caterpillar Inc. and General Electric Co. decreased more than 2.4 percent after a government report showed orders for durable goods unexpectedly decreased. Corning Inc. dropped 7.2 percent after reducing its forecast for glass demand amid lower television-sales projections. Amazon.com Inc. rallied 3.9 percent after its Kindle e-reader and digital-media services helped second-quarter results beat analysts’ estimates.
The S&P 500 slipped 2 percent, its biggest decline since June 1, to 1,304.89 at 4 p.m. in New York. The Dow Jones Industrial Average retreated 198.75 points, or 1.6 percent, to 12,302.55. Treasury yields, which dropped yesterday on speculation lawmakers would reach an accord on the nation’s debt ceiling, rose today as the political stalemate continued.
“The macro events are clearly driving the market,” Sarah Hunt, portfolio manager at Alpine Mutual Funds in Purchase, New York, said in a telephone interview. Alpine oversees about $6.5 billion. “Beyond the fact that we have this political squabble, which never makes people feel better, you also have an underlying potential softening in the economic data.”
The S&P 500 has fallen 3 percent this week, its biggest three-day decline since June 3, as Republicans and Democrats sparred over separate plans to raise the federal debt limit and avoid a default by Aug. 2. S&P, Moody’s Investors Service and Fitch Ratings have said they may downgrade the U.S.’s top AAA rating if lawmakers fail to resolve the stalemate. Stocks rallied 2.2 percent last week as corporate profits topped analysts’ estimates.
‘True Compromise’
Equities declined today as an agreement remained elusive. House Speaker John Boehner’s reworked deficit-cutting plan was gaining support among Republicans, while Senate Majority Leader Harry Reid said his competing proposal to avert a potential U.S. default is the only “true compromise.”
The non-partisan Congressional Budget Office said Reid’s plan would cut $2.2 trillion over 10 years, shy of its $2.7 trillion target. The savings also fall below the $2.4 trillion needed to meet Republican demands that a debt-limit extension be accompanied by an equal amount of savings. President Barack Obama is insisting on a debt-limit increase large enough to last through the 2012 elections.
CBO said Boehner’s plan would save just $850 billion rather than its advertised $3 trillion, forcing him to make revisions and round up backing among fiscal conservatives after Republican leaders postponed a vote scheduled for today.
Investor Concern
Rates on six-month Treasury bills due Aug. 4 climbed 10 basis points to 0.15 percent, the highest since February, according to Bloomberg Bond Trader data, a signal investors are growing more concerned that lawmakers will fail to reach an agreement on the nation’s debt. The bills are the first government debt securities to mature after the deadline to increase the $14.3 trillion borrowing limit passes on Aug. 2.
Benchmark Treasury 10-year note yields increased two basis points to 2.98 percent.
Stock futures retreated earlier as the U.S. Commerce Department said bookings for goods meant to last at least three years fell 2.1 percent in June after a 1.9 percent gain the prior month that was smaller than last reported. The median forecast of 76 economists surveyed by Bloomberg News projected a 0.3 percent increase.
Stocks lost further ground in the afternoon after the Federal Reserve said the U.S. economy grew at a slower pace in more parts of the country since the beginning of June as shoppers restrained spending and factory production eased.
