The Aug. 2 deadline to raise the nation’s debt ceiling cast a pall over markets Wednesday, driving the Dow Jones Industrial Average down 198.75 points and Mike Duke, Wal-Mart Stores Inc.’s president and chief executive officer, warned a U.S. default would be “devastating” for the economy.
Testifying before the Senate Finance Committee on Capitol Hill Wednesday, Duke told lawmakers he is concerned about the impact a U.S. default would have on the 106 million customers who shop in his stores weekly.
Several competing plans have been put forward to avoid a default by raising the U.S. borrowing limit while cutting government spending and boosting revenues, but a consensus has yet to crystallize in Washington. If lawmakers don’t reach a deal and the U.S. runs out of money to pay all its bills, interest rates could rise.
“Higher interest rates clearly would have an effect on consumption,” Duke said. “The ability of the consumer to regain confidence, to start reinvesting themselves as families across America is important. A default and the ripple effect I think would be impactful and, representing our consumers, we think that would be very, very difficult for the American economy to withstand at this point in time.”
Duke said shoppers are still uneasy.
“When I talk to customers shopping in our stores, I’m not getting the sense of confidence [from them],” Duke said. “With the situation in the economy, with the job situation and other factors facing consumers, I think a default at this time would be devastating.”
The day’s tumble left the Dow down 1.6 percent at 12,302.55. The S&P Retail Index fared somewhat better, falling 1.1 percent, or 5.75 points, to 539.89.
Among the retail decliners were Abercrombie & Fitch Co., down 4.5 percent to $73.60; American Eagle Outfitters Inc., 4 percent to $13.24; Tiffany & Co., 3.1 percent to $79.05; Saks Inc., 3.6 percent to $10.82, and Nordstrom Inc., 3.3 percent to $49.23.
Jones Apparel Group Inc. ran countertrend, rising 16.3 percent to $12.91, after the firm posted better-than-expected second-quarter profits.