Stock rally cut short as partial government shutdown enters its second day
The stock market’s rally was short-lived as the US government shutdown weighed heavily on investors, who are desperately trying to size the effects of the budget impasse on the US economy.
The federal government entered its second day of a partial shutdown, as Democrats and Republicans continue to disagree on how to fund the government. Several attempts from House Republicans to lessen the visible effects of a partial government shutdown have been turned down by the Senate, which recently revoked a Republican-led effort to implement several stopgap measures to keep the government operating on a limited basis until mid-December.
US stocks were on the defensive after the Standard & Poor’s 500 posted its biggest rally in almost two weeks. The benchmark index fell more than 1 point to 1,693.87. The S&P 500 hit a record high on September 18 after the Federal Open Market Committee decided against scaling back the pace of asset purchases.
The Dow Jones Industrial Average fell more than 58 points to 15,133.10 after 17 of its 30 members posted losses. United Technologies (NYSE:UTX) and American Express (NYSE:AXP) faced the harshest declines, falling at least 1.78 percent. On the flipside, Microsoft (NASDAQ:MSFT) was the Dow’s best performer, advancing more than 1 percent amid rumours some of the company’s top investors want founder Bill Gates off the board.
According to ING chief investment officer Paul Zemsky, “The market is trying to figure out how serious the situation in Washington is.” Equities were under pressure after Obama initiated a meeting with leaders from Congress and the White House to discuss plans for ending the budget impasse. Economists expect a partial shutdown lasting one week would cost the US economy 0.1 percentage point in terms of growth. Over the next several days market participants will have the opportunity to gauge lawmakers’ resolve, and determine Washington’s sense of urgency in ending the first government shutdown in 17 years.
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