U.S. stocks fell, erasing an early rally, as weak manufacturing data and worries that ratings firms still could downgrade the U.S. government's credit overpowered investor relief about a debt-ceiling deal.
The Dow Jones Industrial Average shed 121 points, or 1%, to 12014, after briefly falling below 12,000 for the first time since late June. Earlier, the measure had gained as much as 139 points immediately after the open as investors reacted to the weekend debt agreement. The action added to what was the Dow's biggest weekly point loss since May 2010, which came as investors fretted last week that Washington had run out of time to engineer a debt agreement.
The Standard & Poor's 500-stock index lost 16 points, or 1.2%, to 1276, with all sectors losing ground. The Nasdaq Composite lost 31 points, or 1.1%, to 2726.
Stocks turned negative after a July reading on the manufacturing sector came in well beneath economists' expectations, renewing worries about the state of the U.S. economy. Investors have been anticipating that the economic "soft patch" seen this year and the aftereffects of Japan's earthquake and tsunami would give way to stronger growth in the second half. But the data did little to support those notions.
Markets still were wary over the state of the U.S. debt-ceiling negotiations. A second look at lawmakers' weekend pact spurred some investors to worry that the deal wouldn't be enough to obviate the threat of ratings downgrades. There also was concern that the length of the talks and severity of market gyrations were beginning to have an impact on the broader economy.
"Clearly what's going on in D.C. is affecting the overall economy," said Gary Flam, portfolio manager at Los Angeles-based Bel Air Investment Advisors. "The longer [the debt debates] go on, the more headwinds we face. The bulls' argument was [that] you'll have an acceleration in the economy in the second half. That's being called in to question now."
The early rally in European markets also vanished after the weak U.S. manufacturing data. Asian bourses closed higher in a reflection of investors' initial sigh of relief at a debt pact in Washington.
Health-care stocks were the S&P 500's weakest performers after Medicare said it will cut payment rates to skilled nursing facilities by 11.1% next fiscal year, sending shares of health-care providers tumbling. The decision adjusts for what the Centers for Medicare & Medicaid Services calls an unexpected rise in nursing-home payments this fiscal year.
Kindred Healthcare slumped 30% while Sun Healthcare Group plunged 56% and Skilled Healthcare Group lost 44%. Sunrise Senior Living lost 6.6%.
Merck shed 3.6% to lead decliners in the blue-chip Dow. Home Depot was also weak, falling 2.8%.
In corporate news, the U.S.-listed shares ofHSBC Holdings climbed 3.1% after the bank reported revenue for the first half of the year that exceeded estimates and said it was cutting about 30,000 jobs to revamp its global business.
Paetec Holdings jumped 20% after rural telecom company Windstream said it planned an $891 million all-stock purchase of the company, which focuses on providing broadband and other services to businesses. Windstream's shares shed 1.2%.
The Dow Jones Industrial Average shed 121 points, or 1%, to 12014, after briefly falling below 12,000 for the first time since late June. Earlier, the measure had gained as much as 139 points immediately after the open as investors reacted to the weekend debt agreement. The action added to what was the Dow's biggest weekly point loss since May 2010, which came as investors fretted last week that Washington had run out of time to engineer a debt agreement.
The Standard & Poor's 500-stock index lost 16 points, or 1.2%, to 1276, with all sectors losing ground. The Nasdaq Composite lost 31 points, or 1.1%, to 2726.
Stocks turned negative after a July reading on the manufacturing sector came in well beneath economists' expectations, renewing worries about the state of the U.S. economy. Investors have been anticipating that the economic "soft patch" seen this year and the aftereffects of Japan's earthquake and tsunami would give way to stronger growth in the second half. But the data did little to support those notions.
Markets still were wary over the state of the U.S. debt-ceiling negotiations. A second look at lawmakers' weekend pact spurred some investors to worry that the deal wouldn't be enough to obviate the threat of ratings downgrades. There also was concern that the length of the talks and severity of market gyrations were beginning to have an impact on the broader economy.
The early rally in European markets also vanished after the weak U.S. manufacturing data. Asian bourses closed higher in a reflection of investors' initial sigh of relief at a debt pact in Washington.
Health-care stocks were the S&P 500's weakest performers after Medicare said it will cut payment rates to skilled nursing facilities by 11.1% next fiscal year, sending shares of health-care providers tumbling. The decision adjusts for what the Centers for Medicare & Medicaid Services calls an unexpected rise in nursing-home payments this fiscal year.
Kindred Healthcare slumped 30% while Sun Healthcare Group plunged 56% and Skilled Healthcare Group lost 44%. Sunrise Senior Living lost 6.6%.
Merck shed 3.6% to lead decliners in the blue-chip Dow. Home Depot was also weak, falling 2.8%.
In corporate news, the U.S.-listed shares ofHSBC Holdings climbed 3.1% after the bank reported revenue for the first half of the year that exceeded estimates and said it was cutting about 30,000 jobs to revamp its global business.
Paetec Holdings jumped 20% after rural telecom company Windstream said it planned an $891 million all-stock purchase of the company, which focuses on providing broadband and other services to businesses. Windstream's shares shed 1.2%.
