Markets could keep from plunging as Obama and Republicans negotiate, but things won't be pretty if America can't pay its bills
As Mondays on Wall Street go, this one wasn't black, or even charcoal. It was a sort of dishwater gray - murky, but by no means scary. The Dow and the S&P closed down more than a half percentage point at the end of trading, delivering relatively light losses for a day when many analysts had worried Washington's debt-ceiling standoff would finally draw a harsh rebuke from markets.
So, congratulations, lawmakers. You went one more day without tanking the economy. But don't get the wrong idea. You're about to run out of time, if not with the markets, than with American consumers.
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The debt-limit debate, if left unresolved, could still bludgeon the U.S. recovery in two main ways. A market reaction is the first: The moment bond traders, or stock traders, become convinced lawmakers that aren't going to raise the debt limit by August 2, they could trigger a sell-off on par with the plunge that followed the first failed vote on the Troubled Asset Relief Program in the fall of 2008. Sure enough, analyst firm MKM Partners warned clients on Monday, "The current debt-ceiling impasse has the same feel to it that the TARP vote did back in 2008."