U.S. stocks fell on Friday on news of the debt impasse and weak second-quarter Gross Domestic Product growth, capping off the worst week of the year for the markets, according to reports.
The Dow Jones Industrial Average dropped 97 points, or 0.8 percent, while Standard & Poor's 500 Index fell 8 points, or 0.7 percent. The Nasdaq Composite Index lost 9.9 points, or 0.4 percent. The poor showing comes at the end of a tumultuous week of debt negotiations.
Second-quarter GDP growth fell short of expectations, increasing at a seasonally adjusted annual rate of just 1.3 percent, according to an advance estimate released by the Bureau of Economic Analysis on Friday. Growth for the first half of the year was the weakest since the recession ended, the Associated Press reported. Real GDP in the first quarter was revised sharply downward from 1.9 percent to 0.4 percent.
Austan Goolsbee, Chairman of Obama’s Council of Economic Advisers, said the disappointing growth numbers underscore the need to “end the uncertainty” caused by the possibility of default. “We are at a fragile moment in the world economy and cannot afford to do anything to undermine our recovery at a moment such as this,” he said in a statement.
Commerce Secretary Gary Locke said the second quarter estimate “confirms what we already knew: The economy isn’t growing as fast as it needs to. And every day that we fail to act to lift the debt ceiling and inch closer to default, we threaten our economic progress and job creation.”
Along with the Dow, Asian stock indexes Nikkei, Hang Seng, and Sensex also fell on Friday. Tokyo markets, which were doing well in the morning, dropped sharply on news that the House vote on Republicans’ deficit-reduction plan was delayed Thursday evening, Dow Jones reports.
Analysts had predicted GDP growth to be close to 2 percent in the second quarter. Increased exports and federal government spending, coupled with a deceleration in imports, helped bring Q2 GDP up from the previous quarter. A “sharp deceleration” in personal consumption spending offset some of the gains.
The second estimate for Q2 will be released on August 26.