Stocks plunged Wednesday as top Democrats indicated lawmakers were no closer to reaching a compromise on the federal debt limit and orders for durable goods unexpectedly decreased.
The Dow Jones industrial average closed down 198.75, or 1.59%, at 12,302.55; the S&P 500 fell 27.05, or 2.03%, ending at 1,304.89; and the Nasdaq composite closed down 75.17, or 2.65%, at 2,764.79. All numbers are preliminary.
Equities declined Wednesday as Republicans and Democrats sparred over separate plans to raise the federal debt limit and avoid a default by Aug. 2. S&P, Moody's Investors Service and Fitch Ratings have said they may downgrade the U.S.'s AAA rating if lawmakers fail to resolve the stalemate.
House Speaker John Boehner's reworked deficit-cutting plan was gaining support among Republicans, while Senate Majority Leader Harry Reid said his competing proposal to avert a potential U.S. default is the only “true compromise.”
The non-partisan Congressional Budget Office said Mr. Reid's plan would cut $2.2 trillion over 10 years, shy of its $2.7 trillion target. The savings also fall below the $2.4 trillion needed to meet Republican demands that a debt-limit extension be accompanied by an equal amount of savings. President Barack Obama is insisting on a debt-limit increase large enough to last through the 2012 elections.
The CBO said Mr. Boehner's plan would save just $850 billion rather than its advertised $3 trillion, forcing him to make revisions and round up backing among fiscal conservatives after Republican leaders postponed a vote scheduled for Wednesday.
Stock futures retreated earlier as the U.S. Commerce Department said bookings for goods meant to last at least three years fell 2.1% in June after a 1.9% gain the prior month that was smaller than last reported.