Stocks around the world are Breaking Bad this morning.Weak global markets and the realization that the U.S. government may actually shutdown tonight are putting pressure on the U.S. indexes. The Dow Jones Industrial Average (^DJI), S&P500 (^GSPC) and the Nasdaq (^IXIC) opened down roughly 1%, but are slowly paring initial losses.
Global markets are also feeling the heat with the Nikkei 225 (^N225) closing down 2%, the Hang Seng (^HSI) down 1.5% and Europe's FTSE (^FTSE) is trading off nearly 1%. The FTSE hit its lowest levels of September with miners getting smacked after the HSBC Chinese Manufacturing PMI was revised down to 50.2. Anything below 50 marks economic contraction.
The selling marks a prevailing shift in attitude from last week and the apathy of the last couple weeks. The S&P closed last week at 1,692; just 2% off all time highs and up strongly for the month of September. "If they're going to shoot at me and that's all they've got then bring it on," says Scott Nations, founder and CIO of NationsShares. "But that's a really dangerous view to have when we're talking about Washington because it could really get ugly."
Related: The Upside to a Closed Government
For the most part traders are still banking on the looming shutdown in DC ending in a similar manner to the debt ceiling debacle of 2011 and the fiscal cliff lunacy of last year when the steep sell-offs proved to be buying opportunities. In 1995 and 1996 brief government closures had no meaningful impact on the markets according to a report sent out this morning by the Lindsey Group.
For those looking to play the bullish side, Nations doesn't see technical support until the S&P500 gets to 1,650. That level would mark a 2.5% drop from the close of last week and a more than 4% fall from the all-time closing highs. If traders are going to support stocks that would be as good a time as any to start buying.
A shutdown of the government would mean no official economic data reports. The absence of data could throw more doubt into stocks especially with Non-Farm Payroll report scheduled for Friday. No NFP data would make Wednesday's ADP report into the spotlight. According to Yahoo Finance analysts are looking for 170,000 on the ADP number, down from 176,00 the prior month.
September has been a strong month for the markets, at least so far. That's an atypical performance for what is normally the weakest month of the year. But if today is any indication, October's traditional volatility looks to stay true to form.
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