U.S. Economy: Stocks resume sell-off; Dow finishes down 519

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The Fed said in its statement Tuesday that it expects "a somewhat slower pace of recovery over coming quarters." It had said as recently as six weeks ago that temporary factors, such as the high price of gasoline this spring and Japan's March earthquake and tsunami, would end and the economy would grow at a faster pace in the second half of the year. But on Tuesday, the Fed said those factors were only part of the reason that the economy grew at its slowest pace in the first half of 2011 since the recession ended in June 2009. It now expects slower growth over the next two years.

After losing more than 630 points on Monday, the Dow rallied by nearly 430 the next day. (Photo: Associated Press)

Economists now believe there is a greater chance of a U.S. recession because the economy grew much more slowly in the first half of 2011 than previously thought. The manufacturing and services industries barely grew in July. The unemployment rate remains above 9 percent, despite the 154,000 jobs added in the private sector in July.

Economies across the globe are also struggling.

Worries are growing that Spain or Italy could become the next European country to be unable to repay its debt. High inflation in less-developed countries, which have been the world's main economic engine through the recovery, is another concern. China's inflation rose to a 37-month high in July.

Those economic concerns have pulled attention from stronger corporate earnings this spring.

Dish Network Corp. reported Tuesday that its second-quarter net income rose 30 percent to $334.8 million on stronger revenue. Among the 441 companies in the S&P 500 index that have already reported their second-quarter earnings, profits are up 12 percent from a year ago.

The housing market, though, remains weak. Homebuilder Beazer Homes USA Inc. said its loss widened last quarter after it closed on fewer homes.

Consolidated trading volume was heavy Tuesday, at 9.2 billion shares. Nearly 12 stocks rose for every one that fell on the New York Stock Exchange.

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