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After The Close - Stocks fell sharply today on fears of the disruption a lingering federal government shutdown might cause, and concerns about the thus-far-unmet need by Congress to raise the nation’s debt limit. At the close, the Dow Jones Industrial Average was off 137 points and the NASDAQ was down 41 points. Market breadth was weak, with declining issues outpacing advancers by more than three to one on the New York Stock Exchange.

Day Three of the government shutdown saw Wall Street react poorly to what the consequences might be if the freeze were allowed to stay in place for any length of time. Moreover, the fears were fanned by the Treasury Department’s dire warning this morning as to what could happen if Congress failed to raise the nation’s debt ceiling later this month. Indeed, Treasury said that the effects of a failure of the United States not paying its debts if the debt ceiling is not raised "would be unprecedented and potentially catastrophic."

The Dow fell as much as 186 points after hearing those words, but later drew support from a reported assertion by House Speaker John Boehner that a default on the nation’ s debt would not come to pass. Stocks remained deeply in negative territory, though, likely on the prospect of weaker economic growth, owing to the government shutdown.

In any event, Wall Street may have been looking for a reason to sell off, given the surge in the market averages this year. Valuations had become a bit extended, and the budget and debt-ceiling impasses may be providing the justification for a minor correction. There is almost sure to be a relief rally, if and when the parties concerns in Washington come to some sort of compromise on the issues at hand. But there could be more pain for investors in the coming days, as long as the issues at hand are unresolved. 

All of the stock market’s ten major sectors finished in the red for the session, with shares of basic materials, industrial, technology, and utility companies among the weakest performers.

Tomorrow was supposed to bring the monthly employment report from the Labor Department, which normally occurs on the first Friday of most months. But Labor’s website has posted a notice that no data will be issued during the government shutdown. Around 180,000 jobs had been expected to be added in September. -Robert Mitkowski

At the time of this article's writing, the author did not have positions in any of the companies mentioned.

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12:30 PM EST - The U.S. stock market got off to a weak start this morning, with losses deepening further into the session. Traders are likely becoming more concerned about the government shutdown and the upcoming debt ceiling debate. Notably, this comes on top of concerns about top level changes at Fed, and more importantly a less accommodating shift in the monetary policy. At just past noon in New York, the Dow Jones Industrial Average is off 170 points; the broader S&P 500 Index is down 22 points; and the NASDAQ, unable to buck the downtrend as it has in the past, is off 57 points. Market breadth is sharply negative, with declining stocks ahead of advancers by roughly six to one on the NYSE. All of the market sectors are trading lower, with notable weakness in the industrials and in the basic materials issues. The utility stocks, which are normally defensive issues, are also quite weak today. While there is no strength in the market, the telecoms and healthcare stocks are holding up a bit better than other groups, at least for now.

Technically, today’s move lower pushes the S&P 500 below its 50-day moving average, located at about 1,675. While this has been an area of support, it remains to be seen if this will again be the case. Fear on Wall Street is definitely mounting, as the VIX is about 12% higher, to 18.57 today. Ultimately, with the run up over the past six months, stocks have likely become a bit vulnerable to selling, especially as the third-quarter earnings season approaches. Notably, traders may not be too forgiving, if corporate results do not meet, or even exceed, forecasts.

Traders, worried about broader issues, probably looked past the economic news issued today. Initial jobless claims for the week ended Sept. 28th came in at 308,000, which was lower than had been expected. However, the ISM Services Index came in at 54.4 for the month of September, falling a bit short of the consensus view.

In corporate news, Constellation Brands (STZ) stock is up, as the beverage maker posted decent bottom- line results. Also, Tenet Healthcare (THC) shares are up after positive remarks from a leading rating agency. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The SurveyThere is some corporate news to keep an eye on today. On the earnings front, shares of Constellation Brands (STZ) are down slightly ahead of the bell, after the wine, beer, and spirits company released mixed August-period results. Earnings were better than expected, but revenues missed the mark. Race track owner and operator International Speedway (ISCA) has also released August-quarter financials. Elsewhere, the stock of Zale Corp. (ZLC) is moving moderately lower in pre-market trading, after the jeweler said that one of its largest investors may sell 11 million shares of the retailer. – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Before The Bell - The stock market fell back sharply at the start of the trading session yesterday, as investors apparently rethought the implications of the government shutdown and perhaps came to the conclusion that it may not be as much of a non-event as they had thought on Tuesday. Indeed, after the Dow Jones Industrial Average had jumped by 62 points the day before, following the aforementioned partial shutdown, and the NASDAQ had climbed 46 points, or better than one percent, the stock market retraced its gains early in the session yesterday, and in the case of the Dow, managed to shed 145 points at its intra-session nadir.

Unlike some recent selling squalls, however, this latest one wasn't a steady affair. So, after the Dow had plunged early, it proceeded to erase a good portion of that setback by lunch time. The NASDAQ, in particular, showed relative strength. Later on, though, when the bulls could not fashion even more of a comeback, the decline resumed for a time, but not with any real conviction, as evidenced by the proportionately smaller losses in the Standard and Poor's 500 Index and the NASDAQ. In fact, even the Dow rallied into the close, with that index's loss finally easing to just 59 points. The other major composites did better, but the small- and mid-cap indexes did proportionately worse, in a reversal of their recent form.     

Meanwhile, the early selling suggested that there is some real fear out there after all. In part, this would seem to reflect the fact that there were few signs that Congress was making noticeable progress in agreeing on a spending bill that would reopen the functions shut down by the failure to conclude a budget deal. Investors also were watching the situation for some sign of how an impending debate on the debt ceiling would play out. This latter issue, which has an October 17th deadline, is the more serious of the two now facing Congress, as a failure to raise the debt ceiling would almost certainly result in a credit default by our nation for the first time in its history. At least there is precedence for a government shutdown, with the latter having occurred in 1995.

These Washington issues, which would have been high-profile concerns under any circumstances, stand out even more at this time, with the economic news sparse so far this week and with the onset of third-quarter profit season still more than a week away.

Encouragingly, as the session ended, Congressional leaders and President Obama were scheduled to meet to discuss the budget impasse and to map out a possible agreement to raise the U.S. debt limit before the October 17th deadline. Optimism that there could be some movement on this front helped the market firm up during the session's final minutes. However, after a somewhat lengthy get together at the White House, the two sides reported no progress and, in fact, the parties appeared to harden their positions. At this time, it would seem that a longer shutdown than previously expected may result, with an accord now possibly not coming to fruition until the debt-ceiling debate. Essentially, the Republicans want some modifications to the Affordable Care Act before they will agree to reopen the government; the Democrats have said they will not agree to any changes. So that is where we are.

Thus far, Wall Street seems comparatively unperturbed by the shutdown, although some may soon start to worry about the debt-ceiling violation threat, which is far more serious. Still, even the shutdown is of some concern to the private sector, where United Technologies Corp. (UTXFree United Tech. Stock Report), a major defense contractor, said it would furlough nearly 2,000 workers if the shutdown lasted into next week and another 2,000 if it lasted beyond that time. At some point, the shutdown will have a tangible effect on aggregate GDP growth in this country.

Finally, the equity markets in Europe this morning are mixed to lower on U.S. government fears, while the futures on our shores are now suggesting a lower opening when traders get down to business in less than an hour from now. – Harvey S. Katz     

At the time of this article's writing, the author did not have positions in any of the companies mentioned.