* S&P 500 turns negative for year
* S&P closes below 200-day moving average
* Global growth fears weigh on stocks
* Dow off 2.2 pct, S&P off 2.6 pct, Nasdaq 2.8 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates with details)
By Edward Krudy
NEW YORK, Aug 2 (Reuters) - The S&P 500 turned negative for the year on Tuesday as the wrangling over the U.S. debt ceiling faded and investors turned their attention to the stalling economy.
The broad-based index fell for a seventh day and crashed through its key 200-day moving average in an ominous sign for markets. The seven days of losses mark the longest losing streak since October 2008.
"It is going to be a long week," said Jim Maguire Jr., a NYSE floor trader at E.H. Smith Jacobs. "The bid is not here in the market."
The selloff accelerated into the close as volume jumped well above average. The fall was broad-based, with four stocks falling for every one rising on the New York Stock Exchange.
The index also broke through its 2-1/2 year uptrend line from its bear market low in March 2009. Thursday was its worst day in a year.
For a graphic on the S&P 500 see, graphic http://r.reuters.com/dug92s
Industrial and consumer discretionary shares, which are sensitive to signs of weakness in the economy, were among hardest hit. The S&P's industrial and discretionary indexes <.GSPI> <.GSPD> fell more than 3 percent.
Wall Street's losses followed sharp falls in world equity markets as global manufacturing data this week indicated big industrial economies were on the verge of stalling.
Investors seemed to find little to cheer after the U.S. Senate agreed to a deal to raise the debt ceiling because of the possibility it will not stave off a downgrade of the U.S. government's triple-A rating.
"Investors have made the shift from Washington to what I'm calling economic realities," said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.
Composite volume on the NYSE, the Amex and the Nasdaq reached 9.7 billion shares, well above this year's daily average of around 7.5 billion.
The Dow Jones industrial average <.DJI> dropped 265.87 points, or 2.19 percent, to 11,866.62. The Standard & Poor's 500 Index <.SPX> dropped 32.89 points, or 2.56 percent, to 1,254.05. The Nasdaq Composite Index <.IXIC> dropped 75.37 points, or 2.75 percent, to 2,669.24.
Thursday marked the eighth down day for the Dow industrials, which remained in positive territory for the year.
Shortly after the Senate vote, Fitch Ratings said the agreement to raise the U.S. borrowing capacity means the risk of a sovereign default is "extremely low" and commensurate with a AAA rating. But it warned Washington must reduce its debt or face a downgrade. For details, see [ID:nN1E77114G]
A government report showed U.S. consumer spending fell unexpectedly in June for the first decline in nearly two years as incomes barely rose. [ID:nN1E7710A7]
On Monday a survey on U.S. factory activity suggested manufacturing stalled in July. The survey followed similarly weak reports from Asia and Europe and came after U.S. growth calculations were sharply cut for the first half of the year.
The government's key monthly jobs report for July is due on Friday and will be closely watched by investors.
Big banks were also hit hard. Citigroup
Gold stocks were a bright spot. The precious metal surged over 2 percent to an all-time high as investors scrambled for a safe haven from sliding stock markets.
The Arca Gold Bugs index <.HUI>, which measures the
performance of 16 U.S.-traded gold miners, rose 1.8 percent,
led by a 7 percent jump in Harmony Gold Mining
European debt problems returned to the forefront after
French bank BNP Paribas SA
European shares <.FTEU3> hit their lowest close in 11 months, with selling concentrated on Spain's IBEX <.IBEX>, as well as Italy's FTSE MIB <.FTMIB>, which hit a 27-month low.
Drug company Pfizer Inc