Growing concerns regarding the political standoff on the federal budget and debt ceiling caused a decline in the stock markets in the United States. Investors were concerned that a potential government shutdown or default would harm the slowly growing economy of the country.
In an interview with Bloomberg, Sam Wardwell, investment strategist at Pioneer Investments said, “A government shutdown would be a fiscal cliff that’s big enough in this case to drive the economy into a recession and I think that the market is increasingly worried about that risk because the risk seems to be rising.” He also said that there is nothing to worry about regarding a recession based on the current economic data.
Yesterday, Republican House Speaker John Boehner said he has “no interest in seeing a government shutdown.” According to economists, a government shutdown would cut the economic growth by 1.4 percent, depending on its length. In 1995 and 1996, the Office of Management and Budget estimated that a 30-days shutdown would cost more than $1.4 billion back then, which equivalent to $2.09 billion today.
In addition to passing a budget bill, lawmakers also need to reach a deal to raise the government’s debt ceiling. Treasury Secretary Jacob Lew that the extraordinary measures utilized by the government to prevent breaching the debt limit will be exhausted by October 17. If lawmakers fail to raise the debt limit, the government will not be able to pay its obligations, which could result to a credit rating downgrade.
“The momentum isn’t terrible, but has basically been progressively weakening. The market is vulnerable to the largest correction so far this year, and it just comes down to what kind of news shows up, whether it turns out to be because of Congress, or whatever,” said Jim Welsh, market strategist at Forward Management LLC.
- Dow Jones Industrial Average (DJIA)- 15,258.24 (-0.46%)
- S&P 500- 1,691.75 (-0.41%)
- NASDAQ- 3,781.59 (-0.15%)
- Russell 2000- 1,074.92 (-0.32%)
- EURO STOXX 50 Price EUR- 2, 919.34 (-0.12%)
- FTSE 100 Index- 6,512.66 (-0.81%)
- Deutsche Borse AG German Stock Index DAX- 8,661.51 (-0.03%)
Asia Pacific Markets
- Nikkei 225- 14, 760.07 (-0.26%)
- Hong Kong Hang Seng Index- 23,207.04 (+0.35%)
- Shanghai Shenzhen CSI 300 Index- 2, 394.97 (+0.44%)
Stocks In Focus
Accenture plc (NYSE:CAN) declined more than 3% today to as low as $72.38 per share after releasing its full-year guidance that is lower than the consensus estimates of Wall Street analysts. The second largest technology-consulting company projected that its full-year earnings will be around $4.42 to $4.54 per share. The shares of Accenture ended the trading session at around $74.09 per share, down by over 2%.
The stock price of Nektar Therapeutics (NASDAQ:NKTR) plunged by more than 23% to $10.55 per share after reporting that its NKTR-181, a chronic pain medication failed to meet the primary end point of a Phase 2 study. According to the company, 18% or 53 patients discontinued treatment during the titration period because of adverse events, majority were commonly associated with opioids and only 3% or 9 patients were unable to achieve meaningful relief out of 295 patients who participated in the study.
“A total of 213 patients achieved an average 40% reduction in pain and entered the randomized phase of the study,” said Nektar Therapeutics.
Nike Inc (NYSE:NKE) gained nearly 5% to $73.64 per share after the company posted strong quarterly financial results. The company delivered $0.86 diluted earnings per share, up by 37% and $7 billion revenue, up by 8%. The results were higher than the consensus estimate of analysts of $0.78 earnings per share on $6.97 billion revenue.
The stock price of United Continental Holdings Inc (NYSE:UAL) fell by more than 9% to $30.91 per share after cutting its revenue forecast for every seat flown because of lower fares in some of its flights overseas.