U.S. stocks down, gold surges on debt ceiling deadlock

08:58, July 26, 2011      

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U.S. stocks ended lower on Monday, as investors worried the stalemate in the debt ceiling talks may lead to an actual default of U.S. debt.

The Dow Jones industrial average lost 88.36 points, or 0.70 percent, to 12,592.80. The Standard &Poor's 500 was down 7.59 points, or 0.56 percent, to 1,337.43. The Nasdaq Composite Index dropped 16.03 points, or 0.56 percent, to 2,842.80.

Gold futures, on the contrary, benefited from risk-aversion sentiment, settled at a record high of 1,612.20 an ounce on the Comex division of the New York Mercantile Exchange.

Monday's move came after debt ceiling talks between President Barack Obama and House Speaker John Boehner broke down in the weekend, which spurred concerns that the agreement can not be reached before the Aug. 2 deadline.

Two parties gave their separate plans on Monday, trying to avoid tossing the market into chaos with a default, however, differences were still apparent.

Republicans pushed for a two-step plan that would allow the federal debt limit to immediately be raised by about 1 trillion dollars while Democrats called the proposal a "non-starter" and said they would advance their own plan to reduce the deficit by 2. 7 trillion dollars and raise the debt ceiling until after next year's elections.

Also weighing on the market, Moody's Investors Service downgraded Greece's bond ratings by a further three notches on Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package.

On corporate news front, Kimberly-Clark declined more than 2 percent despite its earnings beat estimates, as the company said 2011 earnings might come in toward the lower end of its forecast.

Research In Motion dropped more than 4 percent after the BlackBerry maker announced it is cutting 2,000 jobs as part of a cost savings plan.

In other markets, the U.S. dollar traded mixed against major currencies in late New York trading, while crude fell 67 cents, or 0.67 percent to settle at 99.20 dollars a barrel on the New York Mercantile Exchange.

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