NEW YORK - U.S. stocks dropped on Monday as investors worried about a standoff on Capitol Hill and the likely duration of a possible government shutdown.
NEW YORK — U.S. stocks dropped on Monday as investors worried about a standoff on Capitol Hill and the likely duration of a possible government shutdown.
“This is not a doomsday situation; at some point someone will blink and there will be an agreement. I’m not optimistic we’re going to avert a shutdown, but I don’t think it’ll last more than a few days,” said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management.
“I don’t see a tremendous amount of panic in the markets, and that to me is a hopeful sign that markets sense an agreement, and maybe an agreement that’s positive,” Heckman added.
Lawmakers have until midnight to pass an emergency measure to keep the federal government running starting Tuesday, the beginning of the 2014 fiscal year. If an accord is not reached, hundreds of thousands of government workers could find themselves on unpaid leave.
The Senate on Monday afternoon voted 54-46 to remove a House-passed delay of the Affordable Care Act, and sent a “clean” budget bill back to the House. Senate and House Republicans are reportedly looking at a one-week measure to avoid a partial government shutdown.
The vote on Capitol Hill follows a weekend that offered no indications of progress between Republicans and Democrats, with Republicans in the House looking to stall President Barack Obama’s Affordable Care Act for a year, in addition to other changes to the law. Democrats have said they would not allow that scenario to play out.
“Will the voices of government workers not getting paychecks and others in the private economy affected by a government shutdown be loud enough for a certain group of House Republicans to get off their “principles’ and do the right thing for the country? If not, then maybe they need to see more than a 175-point drop in the Dow Jones industrial average to get their attention,” noted Elliot Spar, market strategist at Stifel Nicolaus & Co., in emailed commentary.
The Dow Jones industrial average finished at 15,129.67, down 128.57 points, or 0.8 percent.
The Standard & Poor’s 500 index lost 10.2 points, or 0.6 percent, to 1,681.55. The Nasdaq composite declined 10.12 points, or 0.3 percent, to 3,771.48.
“It’s difficult to say what these politicians will eventually put together, but the largest problem the market faces here is not per se the budget controversy, or the debt ceiling, or even quarterly earnings, it’s complacency, which is unsettling because it opens the possibility of a larger decline on any negative news,” said Bruce Bittles, chief investment strategist at R.W. Baird & Co.
The market’s significant climb in the past 18 months has much to do with “zero-percent interest rates and quantitative easing,” said Bittles of the Federal Reserve’s monetary policy, which includes the central bank purchasing $85 billion a month in bonds. The Fed’s monetary easing both encourages investors to buy stocks and discourages investors from selling equities, said Bittles, given the policy has reduced interest rates and returns on government bonds.
The price of oil and gold fell, with oil off 54 cents, or 0.5 percent, at $102.33 a barrel. December gold fell $12.20, or 0.9 percent, to $1,327 an ounce.
Equities held their losses as a barometer of business activity in the Chicago region rose to 55.7 in September from 53 the prior month, with the latest reading “consistent with modest economic growth,” according to the ISM-Chicago association.
The U.S. Labor Department said it possibly would not release the nonfarm-payrolls report this week should the government shut down, but Bittles views the September report as likely to be a nonevent, given the budget battle and the looming partisan dispute over the nation’s debt ceiling.
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