MercoPress. South Atlantic News Agency

Wall Street fears possible downgrade of US rating in spite of vote on debt ceiling

Political system celebrates but not everybody is convinced

Wall Street dropped on worries about a possible downgrade of the United States' top credit rating and signs of economic weakness even as the US Congress passed on Tuesday a bill to avoid a debt default.

Investors seemed to find nothing to cheer after the US Senate agreed to the House-passed deal to raise the debt ceiling because of the possibility it still would not stave off a downgrade of the US government's triple-A rating.

But shortly after the vote, Fitch Ratings said the agreement to raise the US borrowing capacity means the risk of a sovereign default is “extremely low” and commensurate with a AAA rating.

The S&P 500 was down for a seventh day and was on track for its longest down streak since October 2008.

The Dow Jones industrial average was down 131.91 points, or 1.09%, at 12,000.58. The Standard & Poor's 500 Index was down 17.62 points, or 1.37%, at 1,269.32. The Nasdaq Composite Index was down 35.05 points, or 1.28%, at 2,709.56.

European shares fell for a third straight session to hit a 10-month low as bleak US manufacturing data raised concerns about the health of the global economy, while charts pointed to further weakness for major equity indexes.

Shares in personal and household goods companies, down 1.6%, were among the top decliners, led by a 62% slump in Danish jewellery maker Pandora after the company cut its full-year outlook owing to rising costs and a sharp fall in revenue.

The FTSEurofirst 300 index of top European shares was down 1% at 1,057.39 points after falling as low as 1,056.81, the lowest since October 2010. The index, which has fallen in 6 of 7 sessions, is down more than 5% so far this year.

Italy's FTSE MIB index fell 1.8% to its lowest in more than 27 months on worries that Italy could leapfrog Spain to become the next most likely victim of the Euro zone crisis.