US stocks tumble as budget impasse continues
Stocks on the American exchange declined sharply, as the political stalemate over how to extend the government’s borrowing authority entered its second week.
The federal government has been in partial shutdown since October 1 after Democrats and Republicans failed to reach an agreement on extending the debt ceiling. One week later, the threat of a government default has gripped the markets, as both sides of the political stalemate continue to drift apart. With only ten days left before the US exhausts its borrowing authority, the pressure will be on Congress to strike up an agreement that would avoid economic catastrophe. President Barrack Obama has stated repeatedly he will not negotiate with Republicans, who are demanding significant changes to the president’s landmark Affordable Healthcare Act.
The Standard & Poor’s 500 fell to its lowest level in a month, with trade volumes 12 percent below the 30-day average. The benchmark index declined 0.85 percent to 1,676.12 after hitting a record high less than three weeks ago. The Dow Jones Industrial Average fell more than 136 points to 14,936.24, with all but three of its members reporting losses. Dow Jones newcomer Visa experienced the biggest fall, declining 2.18 percent. Other Dow newcomers Goldman Sachs and Nike declined at least 1.1 percent.
The NASDAQ Composite fell almost 1 percent to 3,770.38 after a Raymond James analyst downgraded Facebook from a “strong buy” to “outperform,” giving the social media giant a ten percent upside potential. Facebook (NASDAQ:FB) shares declined more than 1 percent. Shares of IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT) declined at least 1.1 percent, rounding out a soft day for the technology sector.
As a government default hangs in the balance, the financial markets face considerable downside risk, as market participants look for safer places to park their assets. The partial government shutdown also means key economic data will continue to be delayed this week, including a retail sales report from the Census Bureau. The political impasse delayed the Labor Department’s monthly payrolls report last week, making it harder for market participants to determine the Federal Reserve’s next course of action. The Fed will release the minutes of the September 17-18 FOMC policy meetings later this week.
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