Stocks drift as government lowers growth estimate

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NEW YORK (AP) — Stock indexes drifted between gains and losses Tuesday after the government lowered its estimate of economic growth in the third quarter. Higher borrowing costs for Spain also renewed worries about Europe’s debt crisis.

Hewlett-Packard Co. sank 2.8 percent, dragging down the Dow Jones industrial average. H-P lowered its earnings forecast for the 2012 fiscal year after the market closed Monday. The tech giant said it was being “cautious,” citing Europe’s debt crisis and weak consumer spending.

The Commerce Department said the U.S. economy grew at a 2 percent annual rate in the July-September period, down from its initial estimate of 2.5 percent. Economists had expected the figure to remain unchanged.

The Dow Jones industrial average was down 30 points, or 0.3 percent, at 11,516 as of 2 p.m. Eastern. The Dow had been down as many as 113 points shortly before noon. After H-P, aluminum maker Bank of America Corp. had the biggest fall among the 30 stocks in the index, 2 percent.

The Standard & Poor’s 500 index was down 2 points at 1,191. Both the Dow and S&P briefly turned slightly higher in early afternoon trading.

The S&P has lost 5.2 percent over the past week on worries that Spain could get dragged into Europe’s debt crisis and as Congress neared a deadlock over cutting the U.S. budget deficit.

The Nasdaq composite inched up 2 points to 2,525.

The Dow plunged 249 points Monday as a congressional committee failed to reach a deal to cut budget deficits. The congressional impasse raised fears that rating agencies might lower the U.S. government’s credit rating if Congress tries to circumvent the automatic spending cuts that are supposed to occur in the event of an impasse. Some Republicans have said they would try to block cuts to defense spending.

“Markets are looking for clarity, and you didn’t get that from the super-committee,” says Steven Ricchiuto, chief economist at Mizuho Securities. “There’s no reason to believe the economy is going to get stronger.”

Across the Atlantic, there were more signs of trouble in Europe’s debt crisis. Spain was forced to pay sharply higher interest rates in an auction of short-term debt. The higher rates suggest that investors are still skeptical that the country will get its budget under control despite a new, center-right government coming to power this week.

Investors have been worried that Spain could become the next country to need financial support from its European neighbors if its borrowing rates climb to unsustainable levels. Greece was forced to seek relief from its lenders after its long-term borrowing rates rose above 7 percent on the bond market. The rate on Spain’s own benchmark 10-year bond is dangerously close to that level, 6.58 percent.

In other trading, Netflix Inc. sank 3.6 percent. The online video rental company said it raised $400 million from selling debt and stock as it tries to recover from a consumer backlash following price hikes.

Campbell Soup Co. sank 5.5 percent after reporting a 5 percent drop in net income. The company said price increases were not enough to offset lower volume in its soup and beverage businesses.

Medtronic Inc. rose 4.8 percent. The world’s largest medical device maker reported higher-than-expected earnings and reaffirmed its full-year earnings outlook.

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AP Business Writer Bernard Condon contributed to this report.