Congress Passes, President Signs Debt Ceiling Increase; Markets Tank

Passing with a bi-partisan majority of 74-26 in the Senate, the debt ceiling increase and associated debt reduction elements became law today as the President signed the bill this afternoon.

The bill, laden with policies and procedures for further debt reductions from an all-star panel of twelve senators and house members - not yet announced - has been panned by economists as well as by the same politicians who voted for or against the measure, saying the proposed cuts are too small and don't begin to take effect until 2013.

Once again, as congress heads off for a month-long vacation, the deficit and debt issues, along with Medicare, Medicade and Social Security reforms, have been kicked clear down the road until Thanksgiving, when the select panel will present its recommendations.

Wall Street, meanwhile, has other concerns, namely the continuing deterioration of the the US and global economies. Stocks were especially hard-hit at the end of the day, with losses cascading into the closing lows of the day, a more calamitous condition than has been seen in markets in nearly three years.

One would have thought that with the passage of the debt ceiling increase, stocks would rally, but the opposite turns out to be the case as economic data suggests the US is heading into another recession.

The S&P lost ground for the seventh straight session; the Dow made it eight down days in a row. Eash of those situations has not occurred since the disastrous month of October, 2008.

At the other end of the spectrum, gold and silver holders had a field day, with precious metals up sharply in response to a debt reduction bill that more or less satisfies the status quo, while doing little to address the structural issues presented.

Dow 11,866.62, -265.87 (2.19%)
NASDAQ 2,669.24, -75.37 (2.75%)
S&P 500 1,254.05, -32.89 (2.56%)
NYSE Composite 7,831.98, -208.95 (2.60%)

Declining issues buried advancers, 5276-1367. On the NASDAQ, 31 new highs were overwhelmed by 140 new lows. On the NYSE, only 20 stocks made new highs, while 160 reached new 52-week lows. The combined total of 51 new highs and 300 new lows puts further emphasis on the importance of the high-low indicator, which has been presaging a deep pull-back for weeks and is now sending out the strongest sell signal of all, with expanding numbers of stocks making new lows.

Volume was quite strong, yet another indicator that the trouble for equity investors is only beginning.

NASDAQ Volume 2,411,239,500
NYSE Volume 5,976,464,500

Crude oil finished to the downside as well, losing $1.10, to $93.79, the lowest price in over a month. As mentioned above, gold was a stellar performer, picking up $22.80, to a new record high of $1,644.50. Silver was also favored, gaining 78 cents, to $40.09 and higher in the after-hours.

An advance look at Friday's non-farm payroll for July will be made available Wednesday morning at 8:15 am, when ADP releases its monthly Employment Change report.