US stocks dip on debt worries

NEW YORK: US stocks fell Thursday as the market worried about a possible US debt default if Congress fails to act soon to raise the borrowing limit.

The Dow Jones Industrial Average dropped 54.49 points (0.44 percent) to finish at 12,437.12.

The broader S&P 500 shed 8.85 (0.67 percent) at 1,308.87, while the tech-heavy Nasdaq dived 34.25 (1.22 percent) to 2,762.71.

The main indices had opened higher but attention swung to the ongoing debt talks in Washington where President Barack Obama and his Republican foes came under mounting pressure to forge a compromise to avert an early August debt default.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling above the current $14.3 trillion would send shockwaves through the fragile world economy as it digs out from the 2008-2009 financial crisis.

Federal Reserve chairman Ben Bernanke reiterated warnings that a debt default would damage the US economy, telling the Senate Banking Committee it would be a disastrous "self-inflicted wound."

His comments came after Moody's late Wednesday warned that it may cut the triple-A US credit rating because of rising prospects the debt limit will not be raised in time to avoid default.

Marc Pado at Cantor Fitzgerald said the debt drama was coming "at a very bad time for the market" because it was distracting from the just-started earnings season.

"Even companies are reluctant to be optimistic in their forward-looking statement when you have the potential default of the nation in the agenda," he said.

JPMorgan Chase initially buoyed sentiment after posting strong second-quarter earnings. The blue-chip stock rose 1.8 percent to $40.35.

ConocoPhillips shares closed 1.6 percent higher at $75.61. The oil firm announced it would split into two separate firms, one focusing on production and exploration and one specializing in the refinery business.

Bond prices fell. The yield on the 10-year Treasury rose to 2.94 percent from 2.89 late Wednesday, while that on the 30-year bond climbed to 4.24 percent from 4.18 percent.

Bond prices and yields move in opposite directions.

Copyright AFP (Agence France-Presse), 2011