Gridlock over raising debt limit weighs down stocksNEW YORK (AP) - The debt gridlock in Washington pulled stocks lower Tuesday. Republican and Democratic lawmakers have offered competing proposals to avoid a catastrophic default on the government's debt. If an agreement is not reached by Aug. 2, the U.S. won't have enough cash to pay all its bills.
NEW YORK (AP) - The debt gridlock in Washington pulled stocks lower Tuesday. Industrial companies fell sharply after 3M and U.S. Steel reported weakness in TV sales and demand for steel.
Republican and Democratic lawmakers have offered competing proposals to avoid a catastrophic default on the government's debt. If an agreement is not reached by Aug. 2, the U.S. won't have enough cash to pay all its bills.
That could have a devastating effect on financial markets. The U.S. would likely lose its triple-A credit rating, causing interest rates to soar. Stocks could plunge.
Paul Zemsky, chief investment officer of multi-asset strategies at ING Investment Management, said a default could also cause Americans to lose confidence in the economy, causing them to put off major purchases such as buying cars and homes.
"Anything that shakes confidence right now is just bad for the economy," Zemsky said. "And this is just a big confidence-shaker."
The Dow Jones industrial average fell 56 points, or 0.5 percent, to 12,535. The Dow is headed for its third day of losses. The Standard & Poor's 500 index fell 2, or 0.2 percent, to 1,335.
The Nasdaq composite edged up 3, or 0.1 percent, to 2,846. Technology companies rose after Broadcom Corp. raised its revenue forecast for the third quarter on improving demand for its chips. Broadcom rose 10 percent, and rivals Advanced Micro Devices Inc. and Texas Instruments Inc. each edged up about 1 percent.
Strong earnings from Apple Inc., Microsoft Corp. and other major technology companies have made those stocks the market's best performers since the market hit a low in mid-June. The Nasdaq is up 8 percent since June 15, while the Dow is up 5.4 percent and the S&P 500 is up 5.6 percent.
More than half of the Dow's decline came from 3M Co. The stock fell 5.3 percent, the most of the 30 companies that make up the Dow average. The industrial giant, which makes Scotch tape, medical equipment and many other products, said the disaster in Japan and sinking demand for LCD televisions hurt its results. The company makes a kind of film that is used in producing the flat-screen TVs. Since it makes so many kinds of products, investors often see 3M's results as an indicator of how the whole U.S. manufacturing industry is doing.
UPS Inc., the world's largest package delivery company, fell 4 percent after warning that the "uneven economic environment" in the U.S. could affect its results. Its main competitor, FedEx Corp., fell 1 percent.
United States Steel Corp. also said it was seeing uneven economic conditions. The stock fell 9 percent after the company predicted that its earnings could fall in the third quarter.
AK Steel Holding Corp. fell 17 percent, the most of any company in the Standard & Poor's 500 index, after the company said it expects shipments to decline in the third quarter because of higher costs for raw materials.
Netflix Inc. fell 6 percent. The DVD rental and video streaming company's sales missed analysts' expectations late Monday. The company also said recent price changes could discourage some potential customers from subscribing.