Stocks bounce around as the debt debate

Here's an overview of how various markets are reacting to the impasse in Washington over raising the U.S. borrowing limit. The Treasury Department says the government won't have enough money to cover all its bills after next Tuesday if the limit isn't raised.


— Stocks: The Dow Jones industrial average had a sixth straight day of losses. On Friday it closed down 97 points at 12,143. In addition to anxiety over a possible U.S. default, the government also reported that U.S. economy slowed in the first half of the year to its weakest pace since the recession ended two years ago. The S&P 500 index had its worst week in a year. Small company stocks fared worse than the rest of the market as investors shed what they consider to be riskier assets. The Russell 2000 index of small company stocks fell 5.3 percent this week, worse than the 3.9 percent decline in the S&P 500.


U.S. Government Debt: Yields on short-term government debt rose as investors anticipated that the government might have trouble paying its debts as early as next week. The yield on the Treasury bill coming due Aug. 4 jumped to 0.24 percent. Yields on the benchmark three-month T-bills have been as low as 0.01 percent as recently as July 15. Yields on longer-dated Treasury securities fell as investors looked for relatively safe places to park money. Even with the threat of a default or a downgrade of the government's triple-A credit rating, most investors still consider Treasurys one of the safest investments around. If big investors start to doubt the creditworthiness of the U.S., you'll see a sharp rise in yields, especially in the widely held 10-year Treasury note. That hasn't happened yet. On Friday the yield on the 10-year note fell to 2.80 percent, its lowest level of the year, from 2.95 percent late Thursday.


Bond insurance: The cost to protect against a U.S. default within one year has reached a record high this week. Traders have to pay 54 percent more to insure Treasurys for one year than they did last Friday.


Stocks plunged early Friday after the government said that the economy grew at its weakest pace since the recession ended.


Traders already were on edge about a stalemate between lawmakers that threatens to push the nation into default for the first time. The Treasury says it might run out of cash after Aug. 2.


Major indexes recovered some losses by midday as a debt deal appeared more likely.


Just before noon, the S&P 500 index is down a point, or 0.1 percent, at 1,300. The Dow Jones industrial average is down 33, or 0.3 percent, at 12,207. The Nasdaq composite index is up 5, or 0.2 percent, at 2,771.