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Impasse over US debt limit sends stocks lower

The Dow closed about 88 points down, the S&P 500 lost about 7 points, and the Nasdaq fell about 16 points

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Even as debt troubles continue in the U.S. and Europe, U.S. companies have been reporting higher profits. David Kelly, chief market strategist at J.P. Morgan Funds, wrote in a note to clients that the per-share earnings of companies in the S&P 500 index are expected to rise to a record in the second quarter. If that happens, it would surpass the previous record set in the second quarter of 2007.

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"Corporate America has done very well," said Randy Bateman, chief investment officer at Huntington Asset Advisors. "People are looking at these earnings as good indications that there's value in stocks."

Apple Inc. briefly rose to $400 Monday, about a week after the company reported record earnings and revenue on the popularity of its iPhone and iPad. It closed up about 1 percent at $398.50.

After the market closed, Netflix Inc.'s stock fell 8 percent as the DVD rental company issued a third-quarter revenue forecast that was below analysts' estimates. Netflix is bracing for its subscriber growth to slow after it raised prices by as much as 60 percent earlier this month.

E-Trade Financial Corp. rose 6 percent, the most of any company in the S&P 500, after The Wall Street Journal reported that larger rival TD Ameritrade is considering a bid for the company. E-Trade's largest shareholder also called on E-Trade to hold a special meeting to consider selling the company.

Lorillard Inc. fell 4 percent. The maker of Newport cigarettes cautioned that it may not be able to sustain its strong earnings growth in the second half of the year.

Tenet Healthcare Corp. fell 4 percent after earnings at its competitor, the hospital chain HCA Inc., were far weaker than analysts expected as patients had fewer costly surgical procedures. HCA fell 19 percent.

Kimberly-Clark fell 2 percent after the maker of Kleenex tissues and Huggies diapers said its profit fell 18 percent because of higher prices for raw materials and a higher tax rate.

BlackBerry maker Research In Motion Ltd. fell 4 percent after the company said it would eliminate 2,000 jobs, or about 10 percent of its work force. The company has had several product delays and is facing tough competition from Apple's Inc.'s iPhone and smartphones that used Google Inc.'s Android operating system.

About four stocks fell for every one that rose on the New York Stock Exchange. Volume was relatively light at 3.3 billion shares.


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