US STOCKS-Wall Street in broad slump as gov't shutdown draws near

Reuters

* Possibility of budget deal before midnight seen as remote

* All S&P 500 sectors fall, energy and financials drop

* Major indexes still on track for positive September

* Indexes down: Dow 0.9 pct, S&P 0.8 pct, Nasdaq 0.8 pct

By Ryan Vlastelica

NEW YORK, Sept 30 (Reuters) - U.S. stocks fell sharply onMonday as a last-minute deal to resolve a budget impasse inWashington appeared less likely, increasing the chances of apartial government shutdown.

Losses were broad, with all ten S&P 500 sectors lower on theday, led by energy and financials shares. About 80 percent ofcompanies traded on both the New York Stock Exchange and Nasdaqfell.

The House of Representatives early on Sunday voted for anemergency spending bill that includes a one-year delay ofPresident Barack Obama's signature healthcare overhaul despitethreats of a veto from the White House.

A shutdown would have wide-ranging implications for a mosttypes of assets. If a deal is reached quickly, markets mightrecover, but a prolonged shutdown could do significant harm tothe economy and consumer confidence. While a deal could still bereached before the government's fiscal year ends at midnight onMonday, such a possibility was considered unlikely.

Up to 1 million government employees could be furloughed bythe absence of a deal, and if the shutdown takes place, theLabor Department will postpone issuing its closely watchedmonthly employment report scheduled for Friday.

"The government is such an important part of the entireeconomy, between the people it employs and the impact it has onconsumer confidence," said Nicholas Colas, chief marketstrategist at the ConvergEx Group in New York. "The size of theselloff is logical given the stakes."

Energy shares slumped 1.1 percent, droppingalongside a 1.5 percent fall in crude oil prices. Exxon Mobil fell 1.3 percent to $85.79 while Occidental Petroleum sank 1.6 percent to $92.93.

Financial shares were also lower, falling 1 percent.Goldman Sachs dropped 1.8 percent to $156.94 andCitigroup Inc was off 1.7 percent at $48.04.

The Dow Jones industrial average was down 142.57points, or 0.93 percent, at 15,115.67. The Standard & Poor's 500Index was down 13.13 points, or 0.78 percent, at1,678.62. The Nasdaq Composite Index was down 30.16points, or 0.80 percent, at 3,751.43.

The S&P broke under its 50-day moving average of 1,679.88,which had been serving as support. The next key level is theindex's 100-day average of 1,659.29, 1.9 percent below currentlevels.

Wall Street has managed to weather similar incidents in thepast. During the shutdown from Dec. 15, 1995, to Jan. 6, 1996,the S&P 500 added 0.1 percent. During the Nov. 13 to Nov. 19,1995 shutdown, the benchmark index rose 1.3 percent, accordingto data by Jason Goepfert, president of SentimenTrader.com.

That precedent may not hold this time, given that economicgrowth continues to be weak. Wall Street may also be ripe for aselloff, with the S&P near an all-time high and having escapedany sustained pullback this year.

For the month of September, the Dow is up 2 percent,the S&P is up 2.7 percent and the Nasdaq is up 4.4percent.

The Chicago Purchasing Managers index rose more thanexpected in September, climbing to 55.7 from 53 in the previousmonth. Analysts were expecting a reading of 54. The positivedata had little lasting impact on the market's gloomy tone.

In company news, Active Network Inc jumped 26percent to $14.37 after the company said it would be takenprivate by Vista Equity Partners for $1.05 billion.

Overseas, China's factory sector grew only slightly inSeptember as domestic demand faltered, a private survey showed.It was an unexpectedly weak outcome that suggests a firm reboundin Asia's economic powerhouse remains elusive.

A split in Italy's ruling coalition has heightened theprospects of fresh elections that could delay economic reforms.Ten-year Italian government bond yields jumped fora third straight day.

Rates

View Comments (0)