Political fears drag down Wall Street
The stalemate in US debt talks dragged down stocks for a second day yesterday, and light volume showed investors remained reluctant to make bets despite another round of healthy earnings.
Declining issues solidly outpaced advancing ones, even though major averages showed mostly modest declines.
A failure to raise the US debt limit by an 2 August deadline could roil markets and hurt the economy if the US puts off paying bills.
Democrats and Republicans continued to joust last night over which side’s plan has the better chance of passage.
Just 6.46bn shares changed hands in composite trading, another lower-than-average day of activity.
Technology stocks again outperformed after Broadcom Corp reported strong results on Monday night, the latest in a string of chip companies to delight investors. The stock jumped 9.4 per cent to $38.20.
Shares of top Chinese search engine Baidu Inc rose five per cent to $164.36, a day after it forecast revenue well ahead of analysts’ expectations.
The SPDR Technology Select Sector Index exchange-traded fund up 0.3 per cent.
Second-quarter earnings that have been mostly stronger than expected have offered protective armor for a market battered by the debt debate.
At the close, the Dow Jones industrial average was down 91.50 points, or 0.73 per cent, at 12,501.30. The Standard & Poor’s 500 Index was down 5.49 points, or 0.41 per cent, at 1,331.94. The Nasdaq Composite Index was down 2.84 points, or 0.1 per cent, at 2,839.96.
Among investors, retail clients appear more anxious than institutional ones over the failure of lawmakers to reach a deal on the debt ceiling, said Charles Lieberman, chief investment officer of Advisers Capital Management.
“Retail investors I think are more easily scared, and they expressed concern,” he said. “When we discussed the various options with them, they typically come to the conclusion there isn’t a whole lot we can do to deal with the circumstances. Anything we can do could backfire.”
Weighing on the Dow were shares of 3M Co, the conglomerate whose products range from Post-It Notes to speciality films for computers and televisions. Its share dropped 5.4 per cent to $89.93, hurt by softness in some divisions even though its results met estimates. It exerted a 38-point drag on the Dow.