Stocks Dragged Lower by Continued Uncertainty

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"The uncertainty from Washington continues to drag on this market," noted Schaeffer's Senior Equity Analyst Joe Bell, CMT. "With each passing day, investors are becoming more and more frustrated with the lack of clarity, and there seems to be an increasing fear that this could snowball into something bigger. The debt ceiling deadline is also looming over the market and until we get some solutions, many participants just don't want to put a lot of money to work." As the weekend failed to bring any answers, the Dow Jones Industrial Average (DJI) gapped lower out of the gate and closed solidly in the red.

Continue reading for more on today's market, including :

plus...
    Economic experts offer debt ceiling predictions, the Fed releases consumer credit data, and Facebook ( FB ) option bulls stay active.

The Dow Jones Industrial Average (DJI - 14,936.24) moved sharply lower right out of the gate, and couldn't muster much of a recovery throughout the session, settling with a loss of 136.3 points, or 0.9%. After retaking the 15,000 level on Friday, the blue-chip index flirted with the millennium mark for much of the session before relinquishing control. Just three Dow stocks managed to close higher, led by AT&T ( T ), which added 0.7%. The 27 decliners were paced by Visa's ( V ) 2.2% drop.

The S&P 500 Index (SPX - 1,676.12) also fell, dropping 14.4 points, or 0.9%, on the day, but closing north of its 80-day moving average. The Nasdaq Composite (COMP - 3,770.38) followed suit, surrendering 37.4 points, or 1%.


Against this backdrop, the CBOE Market Volatility Index (VIX - 19.41) surged to its highest close since late June, adding 2.7 points, or 16%, to close at its intraday peak.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Despite the negative tone out of Washington, the S&P 500 Index (SPX) and Russell 2000 Index (RUT) seem to remain in a period of consolidation," observed Bell. "In addition, earnings season is set to start this month and expectations once again seem to be relatively low."

3 Things to Know About Today's Market :

  • Raymond McDaniel, CEO of credit rating agency Moody's, tried to calm increased concerns about the unproductive budget negotiations, noting it is "extremely unlikely" that the government will default on its payments. Taking the more panicked side of the argument, U.S. Treasury Secretary Jack Lew warned that the U.S. is nearing a scenario of "not having cash to pay [its] bills." The nation's borrowing limit, or debt ceiling, is scheduled to max out next Thursday, Oct. 17. (CNBC)
  • The Federal Reserve reported that total consumer borrowing rose by $13.6 billion in August, exceeding economists' estimates. Non-revolving credit (such as auto loans and student loans) climbed $14.5 billion, while revolving credit (mostly credit-card use) declined $883 million, marking the reading's third straight monthly decline. (Bloomberg)
  • BlackBerry ( BBRY ) came back into focus today, as a number of tech giants -- including Google (GOOG), Cisco Systems (CSCO), and Samsung -- were introduced as possible suitors to buy all or part of the smartphone maker. These offers, if valid, would be considered as alternatives to Fairfax Financial's standing $4.7 billion offer to take BBRY private. (CNNMoney)

5 Stocks We Were Watching Today :

  1. Options traders have turned bearish on Micron Technology (MU) ahead of the semiconductor concern's turn in the earnings confessional later this week.
  2. Bullish spread buyers continued to target new all-time highs in Facebook ( FB ) shares.
  3. Apple Inc. (AAPL) earned an upgrade and a price-target hike ahead of today's open.
  4. J.C. Penney (JCP) hit another three-decade low but saw additional bullish options strategies at work.
  5. Chesapeake Energy (CHK) -- a notable outperformer on the charts -- was targeted by long-term put buyers.

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Oil futures ended in the red once again, as tropical-storm concerns diminished over the weekend. November-dated oil futures logged a drop of 81 cents, or 0.8%, to settle the day at $103.03 per barrel.

Gold futures, however, rebounded higher after two consecutive losses, capturing some safe-haven appeal as the government shutdown persisted. By the closing bell, December gold futures had gained $15.20, or 1.2%, to close at $1,325.10 per ounce.

SCHAEFFER'S MARKET POSTURE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.



This article appears in: Investing , Options

Referenced Stocks: AA , BBRY , FB , T , V

Schaeffer's Investment Research

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