clear
Wednesday February 10th, 2016 3:16PM

Stocks down as government heads toward shutdown

By The Associated Press
NEW YORK (AP) -- Stocks sank Monday as Wall Street worried that a budget fight in Washington could lead to something much worse for the economy- a failure to raise the nation's borrowing limit.

It has become all but certain that the federal government will partially shut down for the first time in 17 years Tuesday because Congress and the White House have failed to reach an agreement to fund federal spending.

But investors are looking beyond that first impasse because any hit the economy and markets should be temporary if the shutdown is short. The bigger worry is the problem with the debt ceiling, they say.

"The concern is government has become so polarized that if they cannot pass (a budget), there's a greater chance that the debt ceiling battle will go to the brink or possibly lead to a default," said Alec Young, global equity strategist with S&P Capital IQ.

Treasury Secretary Jack Lew said last week that the government would run out of borrowing authority by roughly Oct. 17. The last time the debt ceiling issue came up in August 2011, it led to Standard & Poor's downgrading the United States' credit rating and the Dow Jones industrial average went through nearly three weeks of nauseating triple-digits moves almost daily.

On Monday, the Dow dropped 97 points, or 0.6 percent, to 15,161 as of 11:55 a.m. Eastern. The Standard & Poor's 500 slid 8 points, or 0.5 percent, to 1,684 and the Nasdaq composite dropped 10 points, or 0.3 percent, to 3,772.

Selling was broad as all but two members of the Dow fell.

There is a simple reason why the budget battle - and, more importantly, the fight over the debt ceiling - are so important: the credit of the United States is the bedrock that nearly every other investment is built upon, due largely on the assumption that the nation will always pay its debts.

The benchmark U.S. 10-year Treasury note is used to value mortgages, corporate bonds, and even stock dividends. If domestic and foreign investors begin to question whether the U.S. will pay its debts, it could throw every other investment out of alignment.

"It's a threat to the center of the global financial system that even a small worry can have very large ramifications to all," said Jake Lowery, fixed income portfolio manager at ING U.S. Investment Management.

On Monday, a partial shutdown appeared imminent. With just hours before a midnight deadline to reach a deal on federal funding, Congress and the White House appeared no closer to an agreement.

A short shutdown isn't a worry for investors, but the threat of a longer one is a big concern for Wall Street.

A partial federal government shutdown lasting two weeks could slice off 0.3 percent points off U.S. gross domestic product, according to a report by Macroeconomic Advisers. That is because hundreds of thousands of federal workers will go without a paycheck. Although in previous government shutdowns Congress passed legislation to provide pay to federal workers retroactively, restoring that growth to U.S GDP, that is not a certainty this time around.
© Copyright 2016 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
S&P 500 index has its best year since 1997
The stock market closed out a record year with more all-time highs on Tuesday, giving U.S. indexes their biggest annual gains in almost two decades.
6:56PM ( 2 years ago )
Colorado readies for 'Green Wednesday' pot sales
Police were adding extra patrols around pot shops in eight Colorado towns that plan to allow recreational sales to anyone over 21 on Jan. 1.
1:52PM ( 2 years ago )
Kerry seeks framework for Mideast peace talks
A senior State Department official says Secretary of State John Kerry will try this week to get Israel and the Palestinians to agree on a framework for negotiating a final peace agreement, yet cautions against raising expectations for Kerry's latest round of shuttle diplomacy.
1:35PM ( 2 years ago )
U.S. News
Missing Ga. bank director arrested in Brunswick
A bank director accused of losing millions of investors' dollars before vanishing last year was arrested Tuesday during a traffic stop in a city in south Georgia.
7:00PM ( 2 years ago )
Amtrak to suspend some Crescent service in Jan., Feb.
Amtrak service will shut down in parts of the Southeast for several days in January and February for rail maintenance by Norfolk Southern Railway.
9:00AM ( 2 years ago )
Lung cancer scans urged for some smokers, not all
Certain current or former heavy smokers should start getting yearly scans for lung cancer to cut their risk of death from the nation's top cancer killer, government advisers said Monday - even as they stressed that the tests aren't for everyone.
7:26AM ( 2 years ago )
Business News
Sex offender held in Hall County for failing to register
A 47-year-old man was booked into the Hall County Jail Tuesday, being held without bond for allegedly failing to register as a sex offender, his second such arrest.
6:09PM ( 2 years ago )
Pharmacy robberies may involve same suspect
Oakwood Police Tuesday afternoon released details in a pharmacy robbery they're investigating, similar to one that happened in the Hall County Tuesday morning.
5:46PM ( 2 years ago )
Victim critical following apartment fire
A 41-year-old woman was in critical but stable condition Tuesday after being rescued from an apartment fire in Forsyth County late Monday afternoon.
3:16PM ( 2 years ago )
Local/State News
Feeling US snub, Saudis strengthen ties elsewhere
Increasingly vocal in its frustration over U.S. policies in the Mideast, Saudi Arabia is strengthening ties elsewhere, seeking out an alignment that will bolster its position after it was pushed to the sidelines this year.
4:34PM ( 2 years ago )
NSA reportedly intercepts computer deliveries
A German magazine has lifted the lid on the operations of the National Security Agency's hacker unit, revealing how American spies intercepted computer deliveries, exploited hardware vulnerabilities, and even hijacked Microsoft's bug report system to spy on their targets.
12:31PM ( 2 years ago )
Rockets fired from Lebanon into Israel
Rockets from Lebanon struck northern Israel on Sunday, causing no injuries but sparking an Israeli reprisal shelling in a rare flare-up between the two countries.
12:26PM ( 2 years ago )
Politics
New Jersey Gov. Chris Christie is expected to drop out of the 2016 race for the White House after disappointing finish in the New Hampshire primary
NASHUA, N.H. (AP) — New Jersey Gov. Chris Christie is expected to end his campaign for the Republican nomination for president after a disappointing finish in Tuesday's New Hampshire primary.That's ac...
2:41PM ( 34 minutes ago )
Man faces 30 counts of animal cruelty in Forsyth County
A Forsyth County man faces multiple animal cruelty charges after authorities removed several dogs from a residence in the western part of the county earlier this month.
10:50AM ( 4 hours ago )
UPDATE: Mother, 2 daughters killed in Gwinnett County house fire
Authorities said a mother and her two young daughters have died in a house fire in Tucker.
By Associated Press
9:00AM ( 6 hours ago )
Forecasters extend winter weather advisory for north Georgia
Forecasters are extending a winter weather advisory for much of north Georgia over concerns about black ice forming on roads as light snow showers continued in the region.
By Associated Press
6:00AM ( 9 hours ago )
Republican Donald Trump and Democrat Bernie Sanders swept to victory in Tuesday's New Hampshire primaries, adding crucial credibility to their upstart candidacies
MANCHESTER, N.H. (AP) — Republican Donald Trump and Democrat Bernie Sanders rode a wave of voter frustration with American politics to commanding victories in Tuesday's New Hampshire primaries, adding...
2:08AM ( 13 hours ago )