Stocks moved sharply lower over the course of the trading day on Wednesday, as traders expressed concerns about the impact of a default by the U.S. government amid indications that lawmakers in Washington continue to struggle to reach an agreement on raising the debt limit.
The major averages posted steep losses, ending the session near their worst levels of the day. The Dow fell 198.75 points or 1.6 percent to 12,302.55, the Nasdaq plummeted 75.17 points or 2.7 percent to 2,764.79 and the S&P 500 dropped 27.05 points or 2 percent to 1,304.89.
The sell-off on Wall Street came as traders worried about whether lawmakers will be able to reach an agreement in time to prevent a government default and allow the U.S. to maintain its AAA credit rating.
With the deadline to raise the debt ceiling and avoid a default less than a week away, Democrats and Republicans seem to be becoming more entrenched in their positions, raising concerns about whether they will be able to reach a compromise.
Most lawmakers agree that the debt limit should be raised, but there is an ongoing debate about the size of the increase and an accompanying budget deficit reduction.
Additional selling pressure was generated by the release of a report from the Commerce Department showing an unexpected drop in durable goods orders in the month of June, with the decrease largely due to a sharp drop in orders for transportation equipment.
The report showed that durable goods orders fell by 2.1 percent in June following a 1.9 percent increase in May. The steep drop in orders came as a surprise to economists, who had been expecting orders to increase by about 1.0 percent.
Excluding an 8.5 percent drop in orders for transportation equipment, durable goods orders edged up by 0.1 percent in June compared to a 0.7 percent increase in May.
Stocks saw further downside in late-day trading following the release of the Federal Reserve's Beige Book report, which noted that the pace of economic growth has moderated in many of the twelve Federal Reserve Districts.
While traders also reacted negatively to disappointing earnings news from companies such as Juniper Networks (JNPR), shares of Amazon (AMZN) bucked the downtrend after the online retailer reported better than expected second quarter earnings.
Amazon rose by 3.9 percent after reporting second quarter earnings that fell to $0.41 per share but came in above analyst estimates for $0.35 per share. The company also reported stronger than expected revenue growth and provided upbeat revenue guidance.
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