Dow drops for 5th day as debt fears loom

July 28, 2011: 4:49 PM ET
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NEW YORK (CNNMoney) -- U.S. stocks lost steam in the afternoon, pushing the Dow lower for the fifth straight session, as investors remain worried about the impending debt ceiling deadline.

The Dow Jones industrial average (INDU) dropped 62 points, or 0.5%. AT&T (T, Fortune 500) dragged on the blue-chip index, while Cisco (CSCO, Fortune 500) and Microsoft (MSFT, Fortune 500) posted the biggest gains.

The S&P 500 (SPX) fell 4 points, or 0.3%. The Nasdaq composite (COMP) managed to hold on to gains, rising 1 point, or 0.1%. Green Mountain (GMCR) was the best performer on the tech-heavy index. Shares of the coffee company rallied 16% on positive quarterly results and a good forecast for the year.

Earlier in the day, the Dow was up almost 0.7%, while the S&P 500 had climbed 0.9%. The Nasdaq had popped nearly 1.3%. Investors welcomed encouraging news from the job and housing markets, but are still looking for Congress to strike a deal on the debt ceiling.

The softness in the afternoon came as the House began to debate the debt ceiling plan favored by Republicans. Even if the measure passes when the House votes later Thursday, it is expected to die in the Senate, and barring that, President Obama has threatened to veto it.

"The market is sending a message that Washington needs to get its collective act together," said Tom Schrader, managing director at Stifel Nicolaus. "I don't think that the U.S. will default, but politicians are using scare tactics and investors are nervous."

A day earlier, stocks dropped deep into the red, as Congress continued to stall on a debt ceiling agreement and the manufacturing sector showed signs of a slowdown.

Worries about Washington's inability to reach a solution to its fiscal problems by the Aug. 2 debt ceiling deadline have sparked a recent sell-off in the market.

Declines over the past five sessions have put stocks on track for the worst weekly performance in a year. The Dow has dropped 3.5% drop so far this week, its worst weekly showing since June 2010, while both the S&P 500 and Nasdaq declined 3%, making this their worst week since August 2010.

Schrader said trading will remain choppy, as lawmakers continue to squabble over raising the debt ceiling and cutting the the nation's deficit, but he expects the Treasury and equity markets to rally once the debate is resolved.

Economy: The Labor Department reported 398,000 Americans filed for initial unemployment benefits last week -- the first time claims have dropped below 400,000 in more than three months. Economists polled by Briefing.com had expected 415,000 claims.

The National Association of Realtors said pending home sales rose 2.4% in June. Sales were forecast to have slipped 3% last month, after jumping 8.2% in May.

Investors are also looking ahead to Friday's second-quarter GDP report. The government will report how much the economy expanded -- and don't expect much good news.

A CNNMoney survey of economists forecast that the economy grew at only a 1.8% annual rate in the second quarter, which would be a slight slowdown from the first quarter, when it grew an already lethargic 1.9%.

Companies: Oil producer Exxon Mobil (XOM, Fortune 500) reported a profit of $10.7 billion in the second quarter -- driven by higher gas prices -- but fell short of earnings expectations. Shares dropped 2%.

LSI Corp. (LSI) shares rose 14% after the company delivered an upbeat outlook for the third quarter, making the stock the best performer on the S&P 500.

Shares of Akamai Technologies (AKAM) tumbled 19%, after the company's second-quarter earnings missed Wall Street's expectations. The stock was the worst performer on the S&P 500 and Nasdaq.

Sprint's (S, Fortune 500) stock also dropped sharply Wednesday . Shares dropped 16% after the wireless operator posted a deeper-than-expected loss for the second quarter.

Time Warner Cable (TWC, Fortune 500) reported better-than-expected quarterly earnings of $1.24 per share. The company attributed that to growth in high-speed data and voice revenues. Shares fell 4.8%.

After Thursday's closing bell, Starbucks (SBUX, Fortune 500) beat earnings and sales estimates, posting a $279.1 million profit for its fiscal third quarter. Shares rose almost 2% in after-hours trading. Metlife (MET, Fortune 500) shares were up 2.5% in after-hours trading after the company reported after earnings that were in line with expectations, and sales above estimates.

America's Debt Crisis

World markets: European stocks ended mixed. Britain's FTSE 100 rose 0.3%, while the DAX in Germany lost 0.9% and France's CAC 40 fell 0.6%.

Asian markets also ended mixed. The Shanghai Composite edged lower 0.5% and Japan's Nikkei was off 1.5%, while the Hang Seng in Hong Kong ticked up 0.1%.

Currencies and commodities: The dollar strengthened against the euro, but weakened against the British pound and Japanese yen.

Oil for September delivery rose 4 cents to settle at $97.44 a barrel.

Gold futures for August delivery slipped $1.70 to settle at $1,613.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, with the yield dropping to 2.95% from 2.98% late Wednesday. To top of page

Index Last Change % Change
Dow 17,828.24 0.49 0.00%
Nasdaq 4,791.63 4.31 0.09%
S&P 500 2,067.56 -5.27 -0.25%
Treasuries 2.19 -0.04 -1.79%
Data as of 7:06pm ET
Company Price Change % Change
Kinder Morgan Inc 41.35 -0.97 -2.29%
Halliburton Co 42.20 -5.14 -10.86%
General Electric Co 26.49 -0.38 -1.41%
Bank of America Corp... 17.04 -0.07 -0.41%
Apple Inc 118.93 -0.07 -0.06%
Data as of 1:02pm ET
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15 yr fixed3.04%3.09%
5/1 ARM3.10%3.20%
30 yr refi3.93%4.06%
15 yr refi3.05%3.17%
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