Stocks drop on default concern amid debt-limit deadlock

Stocks were dragged down again Monday as little progress is being reported in the ongoing budget disputes in Washington, D.C., now into a second week.

The Dow Jones Industrial Average fell 136.34 points to 14,936.24. The Nasdaq composite index was down 37.38 points to 3,770.38, and the Standard & Poor’s 500 Index lost 14.38 points to 1,676.12, the lowest since Sept. 9.

Little economic news is expected this week ahead of the release of corporate earnings reports for the third quarter.

Commodities were mixed again. Gold rose $15.20 an ounce to $1,325.10, the first gain after three sessions lower. Oil fell 81 cents to $103.03 a barrel.

Bank of America Corp. (NYSE: BAC) and Wells Fargo & Co. (NYSE: WFC) paced declines among banks, each slipping 1.7 percent. International Business Machines Corp. (NYSE: IBM) retreated 1.1 percent as Barclays Plc (NYSE: BCS) lowered its recommendation.

Cooper Tire & Rubber Co. (NYSE: CTB) sank 13 percent to $25.72 as Apollo Tyres Ltd. is seeking to cut its $2.5 billion offer to buy the U.S. company.

Apple Inc. (Nasdaq: AAPL) gained 1 percent to $487.75 after Jefferies Group LLC (NYSE: JEF) upgraded the stock.

About 5 billion shares changed hands on U.S. exchanges, the slowest trading since Aug. 29.

House Speaker John Boehner said in an interview on ABC’s “This Week” that the House of Representatives can’t pass a debt-ceiling increase without packaging it with other provisions. Boehner said the country could default if President Barack Obama doesn’t negotiate. Obama on Monday challenged congressional Republicans to raise the U.S. debt limit by next week and said he’s willing to negotiate on fiscal terms once that is done and government funding is restored.

Without an increase to the debt limit, the U.S. will exhaust its borrowing authority Oct. 17 and would run out of funds to pay all of its bills sometime between Oct. 22 and Oct. 31, according to the congressional budget office.

S&P stripped the U.S. of its AAA credit rating in August 2011 during a stalemate between Obama and Congress over whether to raise the debt ceiling. The S&P 500 fell more than 11 percent in three days.

The S&P 500 had its first back-to-back weekly decline since August as the government began its first shutdown Tuesday in 17 years, placing as many as 800,000 federal employees on unpaid leave and closing some services, after lawmakers failed to reach an agreement on budgets before the start of a new fiscal year.

The action delayed the release of the Labor Department’s monthly payrolls report, due last week. Should the shutdown continue, economic data to be postponed this week include September retail sales and August trade.

The lack of data is making it harder for Federal Reserve policymakers to assess the health of the economy as they consider when to start paring unprecedented monetary stimulus.

The S&P 500 jumped to a record on Sept. 18 as the central bank unexpectedly refrained from reducing its $85 billion monthly bond-buying program, saying it wants more evidence of an economic recovery before scaling back stimulus. The Fed will release the minutes of its Sept. 17 and 18 meeting Oct. 9.

The U.S. earnings season starts Tuesday with Alcoa Inc. (NYSE: AA), America’s biggest aluminum producer, scheduled to release third- quarter results after the market closes.

All 10 industries in the S&P 500 declined except for telephone companies. Consumer-discretionary, financial and raw-materials stocks fell the most, sinking at least 1.2 percent.

The KBW Bank Index sank 1.9 percent as all its 24 members retreated. Bank of America dropped 1.7 percent to $13.81. Wells Fargo, the largest U.S. home lender, lost 1.7 percent to $40.62.

IBM slipped 1.1 percent to $182.01. Barclays cut its rating on the world’s largest computer-services provider to equal- weight, or hold, from overweight, citing concern that IBM’s cash flow may be affected as customers move to online-based software.

Qualcomm Inc. (Nasdaq: QCOM) dropped 1.2 percent to $67.19. Tal Liani, an analyst with Bank of America Corp., cut the rating on the largest U.S. wireless equipment maker to neutral from buy, citing a potential “significant deceleration” in revenue and earnings growth over the next two years amid a slowdown in the smartphone market.

Time Warner Cable Inc. (NYSE: TWC) fell 1.6 percent to $111.02. The second-largest U.S. cable company agreed to buy fiber-optic network provider DukeNet Communications LLC for $600 million in cash. Time Warner Cable plans to use DukeNet to expand its business services in seven southeastern states, including North and South Carolina.

Alcoa added 0.1 percent to $7.97, erasing a loss of as much as 1.5 percent in the final minute of trading. Alcoa’s profit probably doubled during the third quarter to 6 cents a share amid higher demand from the aircraft and automotive industries, according to analysts’ estimates compiled by Bloomberg.

— Bloomberg contributed to this report.

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