U.S. stocks fell once again on Friday, continuing a decline that has sent the Dow Jones Industrial Average (DJINDICES: ^DJI) down more than 3,000 points since Dec. 3. The S&P 500 (SNPINDEX: ^GSPC) also took a substantial hit, and technology stocks were especially weak, leading the Nasdaq Composite to a 3% drop.
Today's stock market
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Data source: Yahoo! Finance
All of the S&P's sectors lost ground for the day. The SPDR Select Communication Services ETF (NYSEMKT: XLC) finished with a 3.3% decline, and the SPDR Select Utilities ETF (NYSEMKT: XLU) sank 0.4%.
Yet even with the market having already fallen so far, there are more threats that could push the Dow and other stock indexes toward a full-fledged bull market. Today, investors are worried about what a government shutdown could mean for the economy and the stocks they own.
Will a government shutdown hurt your portfolio?
Unless lawmakers and the White House reach an agreement on a bill to extend financing for government operations, a shutdown is scheduled to begin Saturday morning. Unlike some similar events in the past, any such move this time around would be a partial shutdown, because Congress and the president have already passed laws funding certain parts of the government, including the Departments of Defense, Labor, Veterans Affairs, Health and Human Services, and Energy, as well as the legislative branch of government. However, that leaves the majority of federal cabinet-level departments, including Homeland Security, Interior, and Treasury, without funding.
In the past, government shutdowns haven't had a lasting impact on the stock market. That's partially because they've tended to be short in duration, and therefore the disruptive impact to furloughed federal workers and the partial suspension of government services hasn't been as large as it would've been given more time. Mandatory government programs still continue even under a shutdown, so Social Security recipients will still get their monthly benefit checks, and Medicare participants will still have healthcare coverage.
Still, some investors fear that this time might be different, as other concerns about the federal government are also weighing on market sentiment. For instance, the departure of Defense Secretary James Mattis raises questions about the future course of U.S. military policy, and that sent defense contractors like Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) down over 3% today. Moreover, with President Trump threatening an extended shutdown, the loss of pay for government workers could become significant enough to have a measurable impact on the economy.
The stock market's drop isn't solely due to fears of the government shutdown, and it's far from certain whether there'd be lasting damage if one does occur. Amid the other troubling issues facing investors, though, the shutdown is just one more reason to be less optimistic about the market's future prospects.
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