Dow Jones average down more than 90 points after US manufacturing slows in July

The debt deal rally lasted all of 30 minutes.
After gaining 139 points minutes after the market opened Monday, the Dow Jones industrial average sharply reversed course, shedding all of those gains after a key manufacturing index tumbled in July.
The Dow was down as many as 145 points after the Institute of Supply Management said its manufacturing index was barely above the 50 point figure that indicates growth. Economists, who believed the U.S. economy would strengthen in the second half of the year, had been expecting a much higher reading.
"This was a shock to the market," said Phil Orlando, chief strategist at Federated Investors. "It clearly offset the emotional strength that we saw in the open from this tentative budget compromise."
Many investors had expected the stock market to rally because President Barack Obama and Congressional leaders announced Sunday that they had agreed on a deal to raise the nation's borrowing limit ahead of Tuesday's deadline. Asian stock markets, which closed before the manufacturing report was released, rose broadly overnight following the deal breakthrough.
The Dow Jones industrial average was down 91 points, or 0.8 per cent, to 12,052 by 1 p.m. It is the seventh day of declines for the Dow.
The broader Standard and Poor's 500 index lost 13, or 1 per cent, to 1,279. The Nasdaq composite lost 31 or 1.1 per cent, to 2,725.
Monday's losses brought the S&P index below its 200-day moving average of 1,280. Anytime the market falls below the long-term moving average, it often fuels additional losses. Orlando said the S&P could fall to 1,250 or lower over the next few days as investors begin to doubt the strength of the economy.
Health care stocks, which lost 2.6 per cent, were the S&P index's worst performers by midday Monday. Merck & Co., Home Depot Inc., and Pfizer Inc. led the Dow lower with losses of 2 per cent or more.
Bond yields fell to the lowest level of the year as investors moved into safer assets. The yield on the 10-year Treasury note fell to 2.73 per cent from 2.80 per cent late Friday. Oil futures dropped 1 per cent to just below $95 a barrel.
The manufacturing report led to a worldwide pullback from riskier assets. The Euro Stoxx 50, an index that tracks blue chip companies in countries that use the euro, fell nearly 3 per cent. Oil futures dropped 1 per cent to just below $95 a barrel. And gold made up its early losses to remain near $1,630 an ounce.
The sell-off comes after other signs the economy has slowed. On Friday, the government said that so far this year the economy has grown at its slowest pace since the recession ended in June 2009. A debt deal that contains reductions in short-term government spending could further weaken the economy, analysts say.
The latest signs of weakness in the U.S. economy pushed the dollar lower against the Japanese yen and the Swiss franc, two currencies that traders see as relatively safe bets. The dollar touched another record low against the franc, and reached a post-World War II low against the yen.
Before the ISM report was released, stocks rose sharply largely because President Barack Obama and Congressional leaders announced Sunday that they had agreed on a deal to raise the nation's borrowing limit ahead of Tuesday's deadline. Investors have been worried that the U.S. might default if a deal wasn't reached. The federal government would be unable to pay all of its bills after Tuesday if a law is not signed. Among them: interest payments on Treasury bonds, salaries of federal employees and Social Security checks to retirees.
The debt agreement would raise the U.S. debt limit by $2.1 trillion. It would also cut at least $2.4 trillion in federal spending over 10 years. Under the bill, a new joint committee of Congress would recommend deficit reductions by the end of November that would be put to a vote by Congress by year's end.
The fact that Congress hadn't yet passed the bill and that many important details were to be decided by the new committee left some investors skeptical about its impact.
"The debt agreement was a step in the right direction but probably a small step," said Bob Gelfond, the head of MQS Asset Management, a hedge fund based in New York City.
Others remained concerned that the bill would cut the deficit enough to prevent a downgrade to the U.S. government's stellar credit rating. Credit ratings Standard and Poor's and Moody's declined to comment on the bill.
"This agreement didn't resolve any of the fundamental differences in the direction of spending and revenues that would address our long-term issues," said Kate Warne, the investment strategist at Edward Jones.