VIDEO: Stocks Fall as Lawmakers Remain at Odds Over Debt
Investors worry about effect a default could have on interest rates
CHIP CUTTER AP Business Writer
July 27, 2011NEW YORK (AP) -- Stocks fell Wednesday as lawmakers remained at odds over how to avoid a debt default. A weak report on orders for manufactured goods also weighed on stocks.
House Speaker John Boehner had planned to hold a vote on his debt-limit plan on Wednesday. But that was postponed after conservative lawmakers scoffed at the proposal and congressional budget officials said it would have cut spending less than advertised. The White House had also threatened to veto Boehner's plan.
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The stalemate has put financial markets on edge. If an agreement is not reached by Aug. 2, the U.S. may not have enough cash to pay all its bills and could default. If that happens, the U.S. would likely lose its triple-A credit rating, pushing up interest rates on mortgages and other kinds of loans. Stocks could also plunge.
Most investors still expect some kind of resolution in the coming days. But the uncertainty over possible changes to tax rates or government spending has made investors nervous, said Todd Salamone, senior vice president of research at Schaeffer's Investment Research. "Investors just want a lot of clarity," he said.
The Dow Jones industrial average fell 128 points, or 1 percent, to 12,374 in early trading. The Dow is headed for its fourth day of losses.
The Standard & Poor's 500 fell 19, or 1.4 percent, to 1,312. The Nasdaq composite index fell 59, or 2.1 percent, to 2,781.
The government said that orders for durable goods fell 2.1 percent in June because of a drop in orders for commercial aircraft, automobiles and heavy machinery. Manufacturing has been disrupted this year by parts shortages from Japan and higher energy prices.
Earnings results were mixed. Amazon.com Inc. rose 5.5 percent, the most of any company in the S&P 500, after the online retailer reported that its earnings and revenue were far higher than analysts were expecting.
Boeing Co. rose 3.1 percent after the company raised its earnings forecast for the year, even as it said it will not deliver as many of its new 787 and 747-8 long-haul planes this year.
Juniper Networks Inc. plunged 20 percent, the most of any company in the S&P 500, after the computer networking equipment maker issued an earnings forecast for the third quarter that was lower than many analysts expected. Computer networking equipment companies, including Cisco Systems Inc., have struggled this year because many Internet providers spent heavily on their products in 2010. As a result, they don't need as much new equipment now. Cisco fell 3 percent, while equipment maker JDS Uniphase Corp. fell 5.6 percent.
Delta Air Lines Inc. fell 6 percent. The airline's earnings were lower than analysts had anticipated because of higher jet fuel expenses and costs related to voluntary buyouts for 2,000 workers.
Precious metals continued to climb as investors looked for relatively safe places to park money. Gold rose $8.10 an ounce to $1,624.90. Silver edged up about 50 cents to $41.22 an ounce. Gold has risen about 1 percent this week, while silver is up nearly 3 percent.