Stocks Retreat and Volatility Surges as Shutdown Persists

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"The drama in Washington continues -- in the third day of the government shutdown, everything seems to be taking a backseat to the ongoing political gridlock," summarized Schaeffer's Senior Equity Analyst Joe Bell, CMT. "The markets greeted this situation with a heavy dose of selling, but finished well off their lows. Elsewhere, news of gun shots near Capitol Hill did little to impact trading." Although the Dow Jones Industrial Average (DJI) pared some of its losses by the close, it still racked up a triple-digit deficit and ended south of 15,000.

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

plus...
    Initial jobless claims inch higher, the Treasury Department warns of a "financial crisis," and BlackBerry ( BBRY ) earns mixed reviews on the Street.

Down more than 186 points at its intraday low, the Dow Jones Industrial Average (DJI - 14,996.48) closed off 136.7 points, or 0.9%. It was the blue-chip index's first finish below the 15,000 threshold since Sept. 6. Just one of the Dow's components -- Verizon Communications ( VZ ) -- closed higher, up 0.5%. Boeing ( BA ) paced the 29 decliners, shedding 2.2%.

The S&P 500 Index (SPX - 1,678.66) spent the entire session in the red, bottoming out close to noon at 1,670.36. By the closing bell, the index had logged a loss of 15.2 points, or 0.9%. Slightly underperforming was the Nasdaq Composite (COMP - 3,774.34) , which swallowed a loss of 40.7 points, or 1.1%.

The CBOE Market Volatility Index (VIX - 17.67) spiked to an intraday peak of 18.71, notching its highest reading since late June. The market's "fear gauge" pared some of these gains into the close, settling up 1.1 points, or 6.5%.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Despite the very uncertain situation, it seems like the market has been pretty resilient," observed Bell. "We continue to see buying on the dips throughout the day and the market once again rebounded today after a lot of early selling. Unfortunately, we still seem to be stuck in a bit of congestion here, as too many buyers seem to be waiting on a resolution or some clarity from Washington."

3 Things to Know About Today's Market :

  • Initial jobless claims climbed by 1,000 last week to a seasonally adjusted 308,000, reported the Labor Department. The report was better than expected, as economists were bracing for a more significant rise. Meanwhile, the four-week moving average of first-time unemployment claims dwindled to 305,000, hitting its lowest point since May 2007. This is the last piece of employment data investors will hear this week, as the partial government shutdown has left the usual monthly payrolls report on ice. (ABC News; The Wall Street Journal)
  • With the Oct. 17 deadline fast approaching, the Treasury Department today issued a warning that serious economic consequences could result if the debt ceiling isn't raised . "Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse," according to the report. (MarketWatch)
  • Dow component -- and major federal contractor -- United Technologies (UTX) said it could be forced to begin layoffs and furloughs if the government shutdown isn't resolved quickly. The number of those affected "could exceed 5,000 employees if the government shutdown continues into next month," announced UTX in a press release. (Bloomberg Businessweek)

5 Stocks We Were Watching Today :

  1. One bearish bettor rolled down a put position on erstwhile Dow component Bank of America Corp (BAC) , in a trade that looks for the stock to potentially enter single-digit territory over the long haul.
  2. The newly announced sale of two solar power plants -- plus a price-target hike from Lazard -- helped Canadian Solar Inc. (CSIQ) soar to yet another new three-year high.
  3. Amid a pending deal to take the company private, BlackBerry Ltd ( BBRY ) found itself on the receiving end of both an upgrade and a downgrade today.
  4. Questcor Pharmaceuticals Inc (QCOR) was targeted by put players, though investors may be looking to lock in some paper profits on the stock as it moves off its year-to-date peak.
  5. After the streaming radio concern released positive listener data, Pandora Media Inc (P) scored a price-target increase from analysts at BMO.

EARNINGS

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

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Crude futures ended in the red for the fourth session in five, as the continued government shutdown prompted concerns about energy usage. Oil for November delivery settled the day at $103.31 per barrel, down 79 cents, or 0.8%.

Gold futures also lost some footing, as investors were not drawn to the metal's safe-haven appeal despite the continued government shutdown. By the closing bell, December-dated futures had dropped $3.10, or 0.2%, to close at $1,317.60 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: BA , BBRY , GE , TSLA , VZ

Schaeffer's Investment Research

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