Is a Stock Market Sell Off Coming?

Zacks

The countdown to the default on the debt ceiling is now at 9 days. Both sides seem to be digging in their heels.

In 2011, there were at least proposals floating around and talk of deals being made 9 days before the deadline. This time, with the White House stating that it won't negotiate over the debt ceiling at all, there are fewer press conferences and less rumors from the Hill.

Up until this point, the stock market, while jittery, hasn't had big swings. Wall Street isn't panicking, mainly because it believes there WILL be a deal of some sort before the deadline.

But this situation is shaping up to be similar to the one leading up to the voting of the TARP program on Sep 29, 2008.

Remember that?

At that time, with the banks in a desperate situation, it was understood that Congress would pass the stimulus program. The week before the TARP vote, the Dow traded in a fairly narrow trading range around 11,000.

But as the vote was proceeding on the floor, and there were whispers that it might not pass, stocks started selling off sharply.

By the end of Sep 29, the TARP vote had failed and the Dow Jones had fallen 777 points, the largest one day point drop in its history up until that date.

Check out this chart from jexfiisto.blogspot.com which provides an excellent 1-day play-by-play on what went on with stocks that day.

Most political watchers think the debt ceiling debate will go down to the wire.

Could another TARP-like sell-off be coming for stocks on Oct 17?

 



Zacks Investment Research

Rates

View Comments (0)