Pat Dollard

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WASHINGTON (AP) — The stock market is on its longest losing streak since the financial meltdown of 2008, confronted almost every day by fresh evidence that the economy is in serious trouble again.

The Dow Jones industrials declined more than 265 points Wednesday, their worst day in more than two months, and closed below 12,000 for the first time since June 24.

Investors sold all day after a report that the economy, which is barely growing and straining to produce jobs, is getting almost no help from consumer spending. Americans saved more in June and spent less for the first time in almost two years.

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Traders shrugged off a last-minute deal to avert an unprecedented default on American debt after heightened economic tension ignited an intense round of selling that sent the Dow plummeting for the eighth-straight day.

Today’s Markets

The Dow Jones Industrial Average plummeted 266 points, or 2.2%, to 11,867, the S&P 500 slid 32.9 points, or 2.6%, to 1,254 and the Nasdaq Composite tumbled 75.4 points, or 2.8%, to 2,669. The FOX 50 dipped 21 points to 897.

In a sign of the breadth of the selloff on Wall Street, 90% of the volume on the New York Stock Exchange was in declining stocks. Adding to the negative sentiment, the blue chips have ended in the red for the past eight sessions — shedding 858 points — the longest losing streak since the financial crisis three years ago.

A bout of disappointing economic data, including a steep downward revision to first-quarter economic expansion and an unexpectedly sharp decline in U.S. manufacturing, has led market participants to doubt the robustness of the economic recovery in recent sessions.

“The U.S. economy is very close to stall speed,” wrote Peter Fisher, head of fixed income at asset-management giant BlackRock. “With the weakness of the U.S. economy becoming increasingly apparent, consumption and investment decisions are rising to the forefront.”

Data released Tuesday showed personal spending fell for the first time in nearly two years in June. The gauge of consumption dipped 0.2% , according to the Commerce Department, shy of the 0.2% increase economists expected. Meanwhile, personal income grew at a pace of 0.1% for the month, slower than forecasts of 0.2%. On the whole, the report points to weakening consumption, which directly factors into broader economic growth measures.

“The dismal employment market and increasing prices are pushing Americans to save more and spend less,” wrote Chris Christopher, senior principal economist at IHS Global Insight.

The closely-watched monthly employment report for July is on tap for Friday, and is expected to show the economy added 57,000 jobs, which would keep the unemployment rate steady at 9.2%. The labor market has been extremely slow to come back during the economic recovery.

Debt Woes in Focus

President Obama signed a bill to raise the debt ceiling after the bill sailed through the Senate earlier on Tuesday. The measure was the subject of heated debate on Capitol Hill and in the halls of the White House for months and voting came hours before the deadline set by the Treasury Department.

While the passage of the bill will help the country avoid a catastrophic default, the chance remains that credit ratings companies may choose to downgrade America’s coveted ‘AAA’ credit rating, which could strongly impact world credit markets, analysts say.

Fitch said Tuesday the compromise-deal is in line with the ‘AAA’ credit rating, and represents a step in the right direction. However, the ratings company noted the country will have to confront difficult choices to balance tax and spending while dealing with a weak economic backdrop.

The debt deal “does not put the U.S. on a sustainable fiscal path,” economists at Barclays Capital wrote in a note to clients, adding “weakness in U.S. growth has the potential to offset most of the savings claimed by the debt reduction package.”

Every major sector fell sharply on the day, leaving few shelters in the equities markets. Conglomerates like General Electric (GE: 17.21, -0.76, -4.23%) and United Technologies (UTX: 78.93, -3.41, -4.14%) struggled the most on the day.

Volume on the New York Stock Exchange was the highest in more than four months, which market participants see as a sign of conviction in the selloff.