Stocks ended sharply lower as the partial government shutdown
continued for a second week. Lack of progress in passing the
emergency funding bill has raised investor concerns about the
debt ceiling deadline. These concerns have pushed the Dow Jones
to its lowest level in a month. Meanwhile, consumer credit
increased in the month of August. This single encouraging report
was unable to lift investor sentiments. Most of the sectors in
the S&P 500 industry groups ended in the red led by consumer
discretionary and material stocks.
For a look at the issues currently facing the markets, make sure
to read today's
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) declined 0.9% to close the
day at 14,936.24. The S&P 500 fell 0.9% to finish yesterday's
trading session at 1,676.12. The tech-laden Nasdaq Composite
Index dropped 1.0% to end at 3,770.38. The fear-gauge CBOE
Volatility Index (VIX) surged 16.0% to settle at 19.41.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 4.54 billion shares,
considerably lower than 2013's average of 6.1 billion shares.
Declining stocks outnumbered the advancers. For 76% shares that
declined, only 21% advanced.
Benchmarks retreated from yesterday's modest gains as the
political confrontation over the ongoing budget issue continued.
Investor apprehensions about the ongoing budget issue and the
debt ceiling limit are increasing day by day. If lawmakers fail
to reach a deal on the budget within the next few days, they
might miss the debt ceiling deadline. The partial government
shutdown has forced millions of workers out of work. These
concerns have lifted the CBOE Volatility index to its highest
level since June. The gauge has gained 48% in the last
Neither Republicans nor Democrats are showing any signs of
progress and both parties are blaming each other. Congress was
"playing with fire" said Treasury Secretary Jack Lew on Sunday.
He also said if a similar situation continues then the country
could default in just over a week. Meanwhile, Republican
House Speaker John Boehner said in the absence of spending cut
conditions, he is failing to obtain the numbers required to
increase the $16.7 trillion debt limit. He added that the country
is on its way to a credit default.
On the home front, consumer credit numbers were released
yesterday. According to the Federal Reserve data, consumer
credit increased to $13.6 billion in August from the previous
month's figure of $10.4 billion. This was above the consensus
estimate of $12.9 billion. Nonrevolving credit increased 8% in
the month of August. However, revolving credit declined at annual
rate of 1.2%. If the shutdown continues, two important
economic reports, trade data and retail sales which are scheduled
to report on Tuesday and Friday respectively will not be
released. In the previous week, construction spending, factory
orders and non-farm payrolls reports were not released.
Investors will also increasingly focus on the third quarter
earnings season. Financial bellwether JPMorgan Chase & Co
) and Wells Fargo & Co (NYSE:
) are slated to report results on Friday. In the second quarter,
financial sector had performed better than the other sectors.
The consumer discretionary sector was the worst performer among
the S&P 500 industry groups. The Consumer Discretionary SPDR
(XLY) lost 1.4%. Stocks such as Amazon.com, Inc. (NASDAQ:
), Comcast Corporation (NASDAQ:
), The Home Depot, Inc. (NYSE:
), The Walt Disney Company (NYSE:
) and McDonald's Corporation (NYSE:
) slipped 2.8%, 1.2%, 0.9%, 1.1% and 0.4%, respectively.
The materials sector also had a bad day and the Materials Select
Sector SPDR (XLB) lost 1.2%. Stocks such as Monsanto Company
), Air Products & Chemicals, Inc. (NYSE:
), The Dow Chemical Company (NYSE:
), Sherwin-Williams Company (NYSE:
) and Mosaic Co (NYSE:
) declined 0.9%, 1.6%, 1.6%, 2.8% and 1.0%, respectively.
AMAZON.COM INC (AMZN): Free Stock Analysis
AIR PRODS & CHE (APD): Free Stock Analysis
COMCAST CORP A (CMCSA): Free Stock Analysis
DISNEY WALT (DIS): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
MOSAIC CO/THE (MOS): Free Stock Analysis
SHERWIN WILLIAM (SHW): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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