Benchmarks ended sharply lower for the second day in a row as investors awaited developments regarding the ongoing budget issue and the debt ceiling deadline. President Barack Obama said he has not received any serious proposals from Republicans which will help both the parties to resolve their differences. The trade balance report was not released yesterday due to a partial government shutdown. Most of the sectors in the S&P 500 industry groups ended in the red led by consumer discretionary and technology stocks. Nonetheless, the utilities sector managed to finish in the green.
For a look at the issues currently facing the markets, make sure to read today’sAhead of Wall Street
The Dow Jones Industrial Average (DJI) declined 1.1% to close the day at 14,776.53. The S&P 500 fell 1.2% to finish yesterday’s trading session at 1,655.45. The tech-laden Nasdaq Composite Index dropped 2.0% to end at 3,694.83. The fear-gauge CBOE Volatility Index (VIX) surged 4.8% to settle at 20.34. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.72 billion shares, lower than 2013’s average of 6.1 billion shares. Declining stocks outnumbered the advancers. For 77% shares that declined, only 19% advanced.
Major indices have enjoyed a big rally this year and touched multi-year highs. But lack of progress on the budget issue and the upcoming debt ceiling deadline are pushing stocks lower in recent days. The Dow and the S&P 500 have declined eleven times in the previous fourteen trading sessions. As time passes, investors are getting increasingly tense about the debt ceiling deadline. The CBOE Volatility Index, generally considered to be the,
"investor fear gauge," has jumped roughly 23% in October.
On Tuesday, President Barack Obama said to Republican Speaker of the House of Representatives John Boehner that he is ready to negotiate with Republicans if the partial government shutdown ends and the threat of "economic chaos" is abolished.
President Obama further said: “So my suggestion to the Speaker has been and will continue to be: 'Let's stop the excuses, let's take a vote in the House, and let's end this shutdown right now'...There are enough reasonable Democrats and Republicans in the house who are willing to vote 'yes' on the budget that the Senate had already passed.”
It seems that there may be no relief for investors very soon. Two Federal Reserve representatives said they wanted the central bank to trim its stimulus program during their meeting in September. Cleveland Fed President Sandra Pianalto said employment conditions have been "substantial enough" since central bank started its massive bond buying program in 2012 to back a tapering. Philadelphia Fed president Charles Plosser said: “Based on this outlook and the improvement in labor market conditions, I believe it would be appropriate for the Fed to begin to reduce the pace at which we are expanding our balance sheet and to bring the purchase program to a close.”
The consumer discretionary sector was the biggest loser among the S&P 500 industry groups. The Consumer Discretionary SPDR (XLY) lost 1.6%. Stocks such as Amazon.com, Inc. (NASDAQ:AMZN), Comcast Corporation (NASDAQ:CMCSA), The Home Depot, Inc. (NYSE:HD), The Walt Disney Company (NYSE:DIS) and McDonald's Corporation (NYSE:MCD) slipped 2.2%, 1.1%, 1.1%, 0.9% and 0.5%, respectively.
The utilities sector finished in the green and the Utilities SPDR (XLU) gained 0.7%. Stocks such as Public Service Enterprise Group Inc. (NYSE:PEG), Exelon Corporation (NYSE:EXC), PG&E Corporation (NYSE:PCG), Consolidated Edison, Inc. (NYSE:ED) and Edison International (NYSE:EIX) added 0.8%, 0.8%, 1.5%, 1.2% and 1.1%, respectively.