NEW YORK-A White House threat to veto legislation that would avert a debt default pushed stocks lower yesterday.Major indexes were already down for the day when the White House said it would object to a Republican plan in the House of Representatives that calls for raising the debt limit by US$1 trillion. The plan would require the debt issue to be voted on again next year, something President Barack Obama does not want.
The stalemate over raising the US's borrowing limit has rattled investors. If an agreement is not reached by August 2, the US won't have enough cash to pay all its bills and could default on its debt.Analysts say a US default would have a devastating effect on financial markets. The country 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 91.50 points, or 0.7 per cent, to 12,501.30. The Dow was already down 40 points in afternoon trading and lost another 50 after the White House threatened to veto the House legislation. It was the Dow's third straight day of losses.The Standard & Poor's 500 index fell 5.49 points, or 0.4 per cent, to 1,331.94. Eight of the 10 company groups that make up the index fell. Only the technology and telecommunications sectors rose.
The Nasdaq composite fell 2.84, or 0.1 per cent, to 2,839.96. Technology companies rose after Broadcom Corp. raised its revenue forecast for the third quarter on improving demand for its chips.Broadcom rose 9.4 per cent, and rivals Advanced Micro Devices Inc and Texas Instruments Inc. each edged up less than 1 per cent.Amazon.com Inc rose 6 per cent in after-hours trading after the online retailer reported that its revenue jumped 51 per cent. Its earnings and revenue were far higher than analysts were anticipating.
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 8.2 per cent since June 15, while the Dow is up 5.4 per cent and the S&P 500 is up 5.6 per cent.About two stocks fell for every one that rose on the New York Stock Exchange. Volume was light at 3.7 billion shares.