U.S. stocks fell, giving the Standard & Poor’s 500 Index (CME:SPZ13) its biggest two-day loss since June, as concern grew that a deadlock among U.S. lawmakers over the debt limit could lead to a government default.
An index of Internet stocks tumbled the most in almost two years, sinking 4.1%. Facebook Inc. and Yahoo! Inc. lost at least 3.5%. Xerox Corp. slid 2.5% after announcing the U.S. has been probing the accounting practices of its outsourcing division. Alcoa Inc. gained 1.8% in late trading after reporting third-quarter earnings that surpassed forecasts.
The S&P 500 fell 1.2% to 1,655.45 at 4 p.m. in New York, the lowest since Sept. 6. The Dow Jones Industrial Average lost 159.71 points, or 1.1%, to 14,776.53. The Nasdaq Composite Index tumbled 2% to 3,694.83. About 6.9 billion shares changed hands on U.S. exchanges, nearly 20% higher than the three-month average.
“The market is going to start to push the government,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. “The longer it drags on, the more uncomfortable everyone gets because we will not rally until something gets done. Get out now and wait for the storm to pass to get back in.”
The S&P 500 slumped 0.9% yesterday to a four-week low as lawmakers remained deadlocked over extending the nation’s debt limit to avoid a default. Its two-day slide of 2.1% is the biggest since June 21. The gauge has fallen 4.1% since its latest record on Sept. 18.
President Barack Obama said the U.S. economy risks a “very deep recession” if Congress doesn’t raise the debt ceiling. Obama spoke less than four hours after he called House Speaker John Boehner to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman.
Lawmakers began taking the first tentative steps toward a path to raising the limit even as the rhetoric grew more divisive. Senate Democrats are planning a test vote before the end of this week on a measure that would grant Obama authority to raise the ceiling, probably for a year, unless two-thirds of both chambers of Congress oppose.
The Treasury has said that it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the government will run out of cash to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
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