NEW YORK – A White House threat to veto legislation that would avert a debt default pushed stocks lower Tuesday.
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 $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 country's borrowing limit has rattled investors. If an agreement is not reached by Aug. 2, the U.S. won't have enough cash to pay all its bills and could default on its debt.
Analysts say a U.S. default would 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 91.50 points, or 0.7 percent, 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 percent, 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 percent, 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 percent, and rivals Advanced Micro Devices Inc. and Texas Instruments Inc. each edged up less than 1 percent.
Amazon.com Inc. rose 6 percent in after-hours trading after the online retailer reported that its revenue jumped 51 percent. 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 percent since June 15, while the Dow is up 5.4 percent and the S&P 500 is up 5.6 percent.
Almost half of the Dow's decline came from 3M Co. The stock fell 5.4 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 3.3 percent after warning that the "uneven economic environment" in the U.S. could affect its results. Its main competitor, FedEx Corp., fell about 1 percent.
United States Steel Corp. also said it was seeing uneven economic conditions. The stock fell 8.3 percent after the company predicted that its earnings could fall in the third quarter.
AK Steel Holding Corp. fell 17.5 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 5.2 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.
About two stocks fell for every one that rose on the New York Stock Exchange. Volume was light at 3.7 billion shares.
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