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Stocks Close Firmly Negative Amid Ongoing Government Shutdown - U.S. Commentary


With the ongoing government shutdown heading into its second week, stocks saw significant weakness during trading on Monday. The losses on the day extended a recent downward trend by the markets, with the Dow falling to its lowest levels in a month.

The major averages moved to the downside going into the close, ending the day firmly in negative territory. The Dow tumbled 136.34 points or 0.9 percent to 14,936.24, the Nasdaq plunged 37.38 points or 1 percent to 3,770.38 and the S&P 500 slid 14.38 points or 0.9 percent to 1,676.12.

The weakness on Wall Street came as lawmakers have failed to make any progress on resolving the impasse over a government spending bill, with comments on the Sunday talk shows suggesting that the two sides remain far apart.

Appearing on ABC's "This Week with George Stephanopoulos" on Sunday, House Speaker John Boehner, R-Ohio, claimed that the House does not have the votes to pass a "clean" spending bill.

Boehner sought to put the blame for the shutdown on President Barack Obama, arguing that the president's unwillingness to negotiate is increasing the risk of a government default.

However, Democrats refuted Boehner's claim that the House could not pass a "clean" government spending bill, daring the Republican leader to bring the legislation to the floor.

"If Republicans and Speaker Boehner are saying there are not enough votes, then they should prove it," Obama said in remarks at FEMA's National Response Coordination Center on Monday.

"My very strong suspicion is there are enough votes there," he added. "Hold a vote. Call a vote right now, and let's see what happens."

Peter Boockvar, chief market analyst at the Lindsey Group, suggested that the markets are getting irritated by the lack of progress in Washington.

"The Sunday political talk shows revealed nothing new and that in turn is what markets are worried about," Boockvar said.

He added, "Market participants still see a deal by sometime next week but the path there, in the context of general uncertainty on the economy and monetary policy, is extraordinarily irritating."

On the economic front, the Federal Reserve released a report late in the trading day showing that U.S. consumer credit rose by slightly more than expected in the month of August.

Sector News

Biotechnology stocks turned in some of the market's worst performances on the day, dragging the NYSE Arca Biotechnology Index down by 2.5 percent. The drop pulled the index down to its lowest closing level in a month.

Within the biotech sector, Incyte (INCY), Exact Sciences (EXAS), and InterMune (ITMN) posted particularly steep losses.

Significant weakness was also visible among banking stocks, as reflected by the 1.7 percent loss posted by the Dow Jones Banks Index. With the loss, the index set a three-month closing low.

Health insurance stocks also saw considerable weakness, resulting in a 1.5 percent drop by the Morgan Stanley Healthcare Payor Index. Molina Healthcare (MOH) helped to lead the sector lower.

Brokerage, retail, and software stocks also posted notable losses on the day, moving to the downside along with most of the other major sectors.

Meanwhile, gold stocks bucked the downtrend by the broader markets, benefiting from an increase by the price of the precious metal. With gold for December delivery climbing $15.20 to $1,325.10 an ounce, the NYSE Arca Gold Bugs Index jumped by 2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index dropped by 0.7 percent.

Meanwhile, the major European markets ended the day mixed. While the French CAC 40 Index closed just above the unchanged line, the U.K.'s FTSE 100 Index and the German DAX Index dipped by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries closed modestly higher but well off their best levels of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.8 basis points to 2.634 percent.

Looking Ahead

Amid a quiet day on the U.S. economic front, traders are likely to keep a close eye on any developments in Washington on Tuesday.

by RTTNews Staff Writer

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