Stocks Fall as Shutdown, Debt Ceiling Rattle Investors
NEW YORK (TheStreet) -- Major U.S. stock averages fell Monday as investors feared the stalling budget talks in Washington over the Patient Protection and Affordable Care Act, popularly known as Obamacare, will destroy the country's international credibility and plunge the global economy into another recession.
The S&P 500 lost 0.85% to 1,676.13. The Dow Jones Industrial Average dropped 0.91% to 14,936.11. The Nasdaq was giving up 0.98% to 3,770.38.
More than 800,000 federal workers have been into on unpaid leave for a week week as lawmakers wrangle over President Barack Obama's signature healthcare law, fueling increasing concerns that the protracted debate will be inextricably linked to discussions about the U.S. debt ceiling.
Failure to forge an agreement could put the country at risk of defaulting on its bills and roiling global financial markets. The day's pullback, while not trivial, was nonetheless small enough to give investors confidence that some sort of a deal will be reached.
"There's still not a panic in the market," said Quincy Krosby, market strategist at Prudential Financial. "You're not looking at a run for the exits; the volume is fairly light."
House Speaker John Boehner warned Sunday on ABC's "This Week" program that a budget deal won't be passed in the House without concessions to the health care law, enacted by Congress in 2010.
"Congress and the President are playing a 'Rebel Without a Cause' style game of chicken at the moment, and equity markets are stuck in the middle," Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York, said in his daily remarks. "It may not come to that, of course, but the "Market Selloff Forces Washington to Act" headline seems more base case than outlier expectation as we wind our way to October 17."General Motors (GM - Get Report) slipped 1.5% to $35.18 as the company issued a recall of 1,658 of its Chevrolet Sonic model over concerns a manufacturing fault could cause the fuel tank to separate from the car body. Reuters reports the recall affects 1,558 models in the U.S. and 100 in Canada. eBay (EBAY - Get Report) shares dropped 1.7% to $54.66 as investors noted that Square is developing yet another product that has the potential to disrupt eBay's PayPal and payments business even further. Square executive Ajit Varma says that Square has been working on the company's Square Market product since February and when complete, will allow small business to grow by selling their products around the world, both online and offline, with the tools that big businesses have. Ford (F - Get Report) declined 1.6% to $16.81 as Bloomberg reported that an anonymous source told the news organization that the board of directors of the number to U.S. automaker will be gathering as soon as this week in Dearborn, Michigan to informally discuss the future plans of CEO Alan Mulally, the former Boeing executive who's credited for turning around the company without resorting to government bailout funds during the auto industry crisis of 2008 and 2010. Mulally is reportedly being tapped to take over Microsoft's (MSFT) CEO position after Steve Ballmer said in August that he plans to retire within a year. Apple (AAPL - Get Report) gained 0.85% to $487.21 after Jefferies analyst Peter Misek upgraded Apple shares to "buy" from "hold" and raised his price target on the shares to $600 from $425, noting that the tech behemoth's suppliers have become more lenient on price which should boost Apple's gross margins. November crude oil futures settled down by 81 cents to $103.03 a barrel. December gold futures on the other hand surged $15.20 to $1,325.10 an ounce as the metal's safe haven appeal increased amid the distress caused by the government shutdown and debt ceiling deadline. The benchmark 10-year Treasury was rising 4/32, diluting the yield to 2.634%. Follow @atwtse -- Written by Andrea Tse and Joe Deaux in New York >To contact the writer of this article, click here: Andrea Tse.>
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