Stocks drop as economic worries resurface‎

NEW YORK— The stock market stumbled again Tuesday and is on pace for its longest losing streak in two years.

The Dow Jones industrial average dipped below 12,000 and the Standard & Poor's 500 index lost nearly all of its gains for the year by midday.

Even as the debt-ceiling bill passed in the Senate, all three major indexes added to their losses as investors reacted to more signs of weakness in the U.S. economy and poor corporate earnings from several big companies.

The Commerce Department reported that consumers cut spending in June by the biggest amount in nearly two years. Analysts had predicted a slight increase. Incomes also rose by the smallest amount since September, reflecting a weak job market. The report comes a day after a weak manufacturing report and last Friday's report that in the first half of the year the economy grew at its slowest pace since the recession ended in June 2009.

The S&P 500 fell 20 points, or 1.6 percent, to 1,267 in afternoon trading. It is now up only 0.7 percent for the year.

The Dow lost 157 points, or 1.3 percent, to 11,976. The Nasdaq composite fell 44, or 1.6 percent, to 2,701.

Archer Daniels Midland Co. dropped nearly 4 percent after the agricultural conglomerate said that it missed Wall Street's profit forecasts. And upper-end retailer Coach Inc. lost 6 percent after the company said margins declined, cutting into profits. With the company already making less from each purchase, if consumers cut back further, companies with lower margins stand to be hurt more than others.

The consumer spending pullback was the latest sign that the U.S. economy may be slowing. On Monday an early stock rally over relief that the House had passed a debt limit compromise was halted by a report that U.S. manufacturing barely grew last month, a much weaker showing than analysts had expected.

Many economists, including Federal Reserve Chairman Ben Bernanke, have said the U.S. economy would gain momentum in the second half of the year as gas prices fall and Japan's factories recover from the earthquake disaster in March. Slow U.S. manufacturing growth, a weak job market and concerns about spending cuts in the debt deal have cast doubt on those predictions.

The growth of China's and India economies have also slowed recently after their respective central banks raised interest rates. American corporations have counted on increasing profits in China as a way to make up for slower revenue growth in the U.S. Companies in the S&P 500 index are expected to make nearly half of their profits overseas in 2011.

"The market is starting to wonder where the growth is going to come from," said Nick Kalivas, a vice president of financial research at MF Global. "It hasn't hit the panic button yet, but that's where we're drifting."

The latest signs of economic weakness pushed government debt prices higher. The yield on the 10-year Treasury again fell to a new low for the year of 2.68 percent from 2.75 percent Monday. Yields fall when bond prices rise. Gold, another asset investors buy when they're worried about the direction of the economy, gained 1.2 percent to $1,641 an ounce.

Stocks took a wild ride Monday, with the Dow finishing lower for the 7th straight session. A report showing poor manufacturing activity quickly deflated the optimism earlier in Monday's session. Stocks ended just below the break even line.

Economy: The Monday's dour manufacturing report came on the heels of last week's GDP report, that the U.S. economy grew at an annualized pace of just 1.3% in the second quarter. More disturbingly, the first-quarter reading was revised down to 0.4%.

Investors will get a number of fresh data points on the economy this week, with the most important coming Friday in the July jobs report.

The U.S. economy is expected to have created 84,000 jobs last month, according to a consensus of analysts surveyed by Briefing.com. In June, the economy added a paltry 18,000 jobs. The unemployment rate is expected to hold steady at 9.2%.

Companies: Shares of NYSE Euronext (NYX, Fortune 500), the parent company of the New York Stock Exchange, fell 3.3% in mid-daytrading. The stock exchange operator posted a 19% drop in second-quarter profit from a year ago, due in part to costs associated with its Deutsche Boerse merger.

General Motors (GM, Fortune 500) said its July auto sales rose 7.6%, which was mostly in line with analysts' expectations. Shares were down 2%.

Meanwhile Ford (F, Fortune 500) posted a 8.9% increase in its July sales. While that was better than expected, shares were down 2.7%.

Pfizer (PFE, Fortune 500)'s stock slid 3%, after the Dow component and pharmaceutical maker posted earnings and sales that slightly beat expectations, but fell from a year earlier.