US Stocks close lower as investors await debt deal (ext)

NEW YORK (CNNMoney) -- The stock market started the week in the red Monday, but losses were not nearly as devastating as some expected, after lawmakers failed to agree on a debt ceiling deal over the weekend.

The U.S. government is just eight days away from a possible default. But instead of selling off stocks in a panic Monday, investors mostly sat on their hands watching Congress haggle.

"They're on the sidelines, waiting, and I don't blame them," said Muriel Siebert, founder of Muriel Siebert & Co. "We have never gone through a situation like this before."

The Dow Jones industrial average (INDU) lost 88 points, or 0.7%, with 26 of its 30 components falling.

Meanwhile, the S&P 500 (SPX) fell 7 points, or 0.6%; and the Nasdaq (COMP) fell 16 points, or 0.6%.

"When I look at my screen, almost everything is red. But they're not down any significant amount. The market did nothing today and it's because we made no progress with the debt ceiling," Seibert said.

In the afternoon, both Democratic and Republican leaders unveiled new plans to reduce the national deficit and raise the debt ceiling.

If Congress doesn't raise the $14.3 trillion debt limit by next week, Americans could face rising interest rates and a declining dollar, among other problems. But investors continue to call Washington's bluff, and are optimistic a deal will be reached before the August 2 deadline.

"I think fundamentally, the market is telling us it doesn't believe we're truly going to default. Somehow, some way there will be a decision," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.

The dollar weakened against the euro and Japanese yen, but strengthened against the British pound.

Oil for September delivery slipped 67 cents to settle at $99.20 a barrel.

Gold futures for August delivery hit a new intraday record of $1,624.30 before settling at $1,612.20 an ounce.