Lack of progress on debt deal saps confidence

Dow Jones: 11,547.31 (-248.85) Nasdaq: 2,523.14 (-49.36) S&P 500: 1,192.99 (-22.66)US STOCKS fell for a fourth session yesterday, as the lack of progress in dealing with heavy debt both in the United States and Europe further sapped investor confidence in equities.

Risky assets such as commodities also fell, sparking a sell-off in shares of industrials and energy companies.

Volume was lower than average, with investors more inclined to sit on the sidelines amid the uncertainty.

A special US congressional committee was expected to concede failure to reach a deal after three months of talks to slash the deficit.

There are concerns the stalemate will make it more difficult to pass extensions of stimulative measures such as payroll tax cuts, which could hurt the US economy.

In addition, investors are worried that the committee’s inability to come to an agreement could result in another downgrade of the US credit rating, although so far the major ratings agencies have not commented.

Moody’s Investors Service said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France’s credit rating.

Blue chips, which have been outperforming smaller cap stocks, fell the most.

Rick Bensignor, chief market strategist at Merlin Securities in New York, said the negative headlines from across the globe made it less likely the market would see a sustained rally, despite stocks having what many traders say are attractive valuations.

“Cheap valuations only do so much. They don’t make bull markets, they make bidders to curtail down markets but in and of themselves, the fact that stocks are cheap is not a good enough reason to think that they are going to go higher.”

Among blue-chip stocks, Bank of America fell 5 per cent to $5.49. On the Nasdaq, Amazon.com shares lost 4 per cent to $189.25.

After the closing bell, Hewlett-Packard reported quarterly results that beat Wall Street’s expectations. The stock rose 2.4 per cent to $27.50 in extended trade.

Merger activity provided a bright spot as Pharmasset surged 84.6 percent to $134.14 after Gilead Sciences agreed to buy it for $11 billion in cash. – (Reuters)