U.S. Stocks Drop as Factory Report Erases Rally Driven by Debt Compromise

U.S. stocks fell,for a sixth day, as slower- than-forecast growth in manufacturing.

Health-care stocks fell 2.5 percent, the most among 10 groups in the S&P 500, after Medicare announced an 11.1 percent rate cut for next year. The S&P 500 Financials Index (S5FINL) dropped 0.6 percent, reversing an early gain, which had been driven by optimism that lawmakers would race to push through a compromise to raise the U.S. debt limit by at least $2.1 trillion and slash government spending by $2.4 trillion or more.

The S&P 500 lost 1.2 percent to 1,277.38 at 11:55 a.m. in New York after climbing as much as 1.2 percent earlier.

Meanwhile, Dow Jones Industrial Average retreated 130.10 points, or 1.1 percent, to 12,013.14 today after rising 139 points.


Manufacturing

Equities erased their gains as data showed U.S. manufacturing expanded in July at the slowest pace in two years, indicating the industry that’s been driving the economic expansion is starting to weaken.

Manufacturing indexes from Asia to the U.S. to Europe fell in July as demand weakened and the global recovery from recession lost momentum. U.K., Russian and Australian manufacturing shrank last month, while the pace of factory growth slowed in Europe and China.