Stocks accelerated their losses across the board Thursday, with the Dow sliding below the psychologically-important 15,000 mark, as investors grew more worried over the impasse in Washington.
“We went into the government shutdown with the assumption of it being over within the (previous) average of three days—now we’re in day 3 and we’re not any closer to a resolution than we were on Sunday,” said Art Hogan, managing director at Lazard Capital Markets. “As more time goes on and less compromise is on the horizon, the more nervous we’ll get…investors are pressing in on the worst-case scenario, which is a Treasury default.”
(Read more: Wall St. wonders if Obama wants ‘severe’ selloff)
The Dow Jones Industrial Average tumbled more than 150 points, dragged by Boeing and Chevron.
The S&P 500 and the Nasdaq were also near session lows.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, spiked above 18.
All key S&P sectors were in the red, led by industrials and utilities.
In a CNBC interview Wednesday, President Barack Obama warned Wall Street that this government shutdown could be worse than others. The previous 11 stoppages in the aggregate did little damage to markets, with the S&P 500 using the crises instead as rallying points.
But major averages opened weaker and progressed lower as uncertainty over when the Washington impasse will get settled and what impact it ultimately will have on markets and the economy.
A relatively flat week for jobless claims helped just a bit. The government reported that claims increased by just 1,000 last week to 308,000, lower than economist projections for 314,000 despite the government shutdown.
In other economic news, the Institute for Supply Management fell to a 54.4 reading, which represents expansion but at a slower pace than economists had anticipated. The reading seemed to underscore a level of uncertainty about the economy and how the political battling will affect growth.
“Thus far this year and despite a clear improvement in the level of initial weekly jobless claims, the pace of hiring has not picked up,” Andrew Wilkinson, chief economic strategist at Miller Tabak, said in a note. “The September (ISM) decline suggests the uncertainty over Washington political gridlock is pinning down the reality of improvements in actual hiring.”
Angie’s List was the biggest loser of the day, dropping more than 11 percent on a report from the Wall Street Journal that the online review service was slashing prices in an effort to gain new customers.
CalAmp shares surged on positive earnings news.
Positive Chinese economic data failed to boost markets fixated on the budget stalemate in Washington.
The budget impasse and resulting partial government shutdown entered its third day on Thursday, after a meeting between President Barack Obama and Congressional leaders failed to yield a solution on Wednesday.
In an exclusive interview with CNBC, President Barack Obama said markets should be worried by the gridlock in Washington.
“This time I think Wall Street should be concerned,” Obama said. “When you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble.”
(Read more: Now you’re worried, fears rise on credit default)
Deutsche Bank’s Gael Gunubu said it was now increasingly likely the budget debate would be folded into the forthcoming battle to raise the debt ceiling before October 17, in order to avoid a default.
“If that occurs, it’s likely that Obamacare will be added to the debate on social security and tax reform, among other contentious issues, increasing the already massive stakes of the debt limit discussion,” she said in a morning research note.
In company news:
BlackBerry shares slipped despite an upgrade from Citigroup, which said the troubled smartphone maker’s shares had been punished enough.
Constellation Brands gained after the spirits maker posted a solid earnings report.
Eli Lilly shares fell 1 percent, despite news from the drugmaker that it plans on launching several new drugs this year that target “unmet patient needs.”
Factory orders data will not be released now because of the shutdown but the ISM (Institute of Supply Management) non-manufacturing survey will still be published on Thursday. The Federal Reserve’s Richard Fisher, Jerome Powell, John Williams and Dennis Lockhart are also scheduled to speak.
In Asia, data out on Thursday showed China’s official services purchasing manager’s index (PMI) rose to a six-month high in September, lifting hopes the country’s growth is picking up.
In Europe, Italian stocks were boosted by Prime Minister Enrico Letta’s triumph in a confidence vote on Wednesday. This followed a dramatic u-turn by rival politician, Silvio Berlusconi, who said he would support Letta, after Berlusconi’s party members rebelled against his move to pull down the government.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap This Week:
THURSDAY: Fed’s Fisher speaks, Fed Gov Powell speaks, Fed balance sheet/money supply
FRIDAY: Nonfarm payrolls, Fed’s Kocherlakota speaks
What’s Trending on CNBC.com:
Stocks accelerated their losses across the board Thursday, with the Dow flirting with the psychologically-important 15,000 mark, as investors grew more worried over the impasse in Washington.
Dow drops below 15,000...
No comments:
Post a Comment