Thursday, October 3, 2013

Markets fall on growing discontent over the shutdown

Dow dropped 136, decliners over advancers almost 4-1 & NAZ lost 40.  The MLP index sank 3+ to 447 & the REIT index was off 4+ to the 267s.  Junk bond funds were lower & Treasuries climbed a little.  Oil fell for a 3rd day this week on concern that a protracted gov shutdown will slow economic growth & reduce fuel demand.  Gold fell on signs demand may be slowing in China, the world’s largest buyer after India.

AMJ (Alerian MLP Index tracking fund)

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CLX13.NYM...Crude Oil Nov 13...103.59 Down ...0.51  (0.5%)

Live 24 hours gold chart [Kitco Inc.]

The US Capitol was in lockdown after gunshots were fired outside the building, injuring several people including a law enforcement officer, a Senate aide & a Capitol police officer said.  The House & Senate were in session when the gunshots were heard.  The gov has been partially shut down this week when lawmakers failed to agree on a budget.  Police called in a Medevac helicopter.  The Senate chamber was locked with staff inside & Senate leaders were locked in their offices.  The shots were fired near the Hart Senate Office Building at 2nd St & Constitution Avenue Northeast, only a few blocks from the Supreme Court.  Adding to confusion to what is already a mess in DC.

U.S. Capitol in Washington in Lockdown After Shots Fired  Reuters

  • President Barack Obama speaks about the government shutdown and debt ceiling during a visit to M. Luis Construction, which specializes in asphalt manufacturing, concrete paving, and roadway reconstruction, Thursday, Oct. 3, 2013, in Rockville, Md. (AP Photo/Charles Dharapak)
Photo:   Yahoo

The stuck in the mud DC goes on.  Obama laid the blame for the partial shutdown at the feet of House Speaker John Boehner, escalating a confrontation that is running the risk of a potentially damaging clash over the nation's borrowing authority.  The Treasury warned that a deadlock over raising the nation's debt limit could touch off a new recession even worse than the last one that Americans are still recovering from.  Worry about prospects for resolving the debt question within the next 2 weeks deepened as the shutdown standoff dragged on.  But the shutdown showdown grew more personal today.  Obama cast the House speaker as a captive of a small band of conservative Reps who want to extract concessions in exchange for passing a short term spending bill that would restart the partially shuttered government.  "The only thing preventing people from going back to work and basic research starting back up and farmers and small business owners getting their loans, the only thing that is preventing all that from happening right now, today, in the next five minutes is that Speaker John Boehner won't even let the bill get a yes or no vote because he doesn't want to anger the extremists in his party," Obama said.  Boehner answered by batting blame back toward Obama & his "my-way-or-the-highway approach."  Boehner said that if the pres would negotiate to fix flaws in "Obamacare," the shutdown could end.  "The president's insistence on steamrolling ahead with this flawed program is irresponsible," said Boehner.  Majority Leader Cantor said the House would continue on its course of passing separate bills to remedy "situations that are in critical stages" because of the partial gov shutdown that began Tues.  The House was expected to vote to for more money for National Guard & Reserves & for veterans programs during the day, & officials said legislation to help Head Start & possibly the WIC (Women, Infants & Children program) could soon be drafted, as well.  However, Senate Dems made clear they will not agree to reopen the gov on a piecemeal basis.  "You can't fall for that legislative blackmail or it will get worse and worse and worse," said Sen Schumer.

Shutdown Continues With Bigger Trouble Looming Associated Press

IMF Director Christine Lagarde said it’s “mission-critical” for the US to raise its $16.7T debt ceiling, warning policy makers that failure to do so would seriously hurt the country and the world.  The first face-to-face talks between the pres & congressional leaders failed to break the budget logjam as a partial gov shutdown entered its 3rd day, raising the prospect of a prolonged standoff extending to the borrowing limit.  “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” Lagarde said in a speech.  “So it is ‘mission-critical’ that this be resolved as soon as possible.”  Lagarde’s concern echoes a report by the Treasury today that a gov default could have catastrophic consequences that might last decades.  Treasury Secretary Lew has said the US started using final extraordinary measures that will be exhausted no later than Oct 17 to avoid a breach of the debt limit.  Less than a week before releasing new global growth forecasts, Lagarde said the fund sees the expansion as subdued, even as signs of growth appear in advanced economies.

IMF’s Lagarde Says Raising U.S. Debt Ceiling Critical

This is becoming an ugly mess in DC only made worse by the gunshots fired today.  It's difficult to see a way out of the budget dispute.  Name calling & assigning blame is one way to extend this despicable mess.  Politico egos are riding high & everybody involved screams when they think their toes have been stepped on.  As long as the DC debacle drones on, markets will be selling off.  Dow is down 125 so far in Oct, but it will get much, much worse the way things are going.  However, YTD Dow is still up almost 2K (although it closed below 15K again).  Maybe this is part a traditional correction.  

Dow Jones Industrials

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