Wall Street reverses before House debt vote

09:12, July 29, 2011      

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U.S. stocks reversed in the final hour of trading and ended mixed on Thursday despite upbeat economic data, as continuing debt woes in Washington still weighed heavily on the market.

Investors chose to keep to the sidelines as lawmakers tried to hash out an agreement on the deficit.

The U.S. House of Representatives will cast its first vote in Congress on House Speaker John Boehner's solution, which is expected to pass the House but has little chance to survive the Senate.

The Dow Jones industrial average extended its losing streak to the fifth straight day, falling 62.44 points, or 0.51 percent, to end at 12,240.11.

The Standard &Poor's 500 dropped for a fourth day after gaining nearly 1 percent in earlier session, ending 0.32 percent lower to 1,300.67.

The Nasdaq Composite Index added 1.46 points, or 0.05 percent, to 2,766.25, also well off session high.

With the clock ticking and still no deal reached, more and more investors began to believe the U.S. government might lose its triple-A rating even if the debt limit is raised in time.

According to a report released by Credit Suisse on Thursday, if the United States defaults on its debt obligations, although it's very unlikely, the country's economy would contract by 5 percent and stocks would fall by nearly a third.

Even if the debt ceiling is raised, according to the Swiss bank, there is a 50-50 chance of a ratings downgrade of U.S. debt by the major ratings agencies.

The reverse in the market happened after major indexes traded in positive territory during most of the session on upbeat economic news.

According to the Labor Department, the number of people applying for jobless benefits dropped 24,000 to a seasonally adjusted 398,000. It's the first time for the initial claims to fall below 400,000 in quite a while, giving sentiment a boost.

Meanwhile, the number of contracts to purchase previously owned U.S. homes unexpectedly rose in June as buyers tried to take advantage of lower prices and borrowing costs.

In other markets, the U.S. dollar traded mixed against major currencies in late New York trading and crude oil ended flat.

Light, sweet crude for September delivery settled up 4 cents at 97.44 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for September delivery edged down 7 cents to close at 117.36 dollars a barrel.

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