* Possibility of budget deal before midnight seen as remote
* Most sectors could be vulnerable, financials at risk
* Major indexes still on track for positive September
* Chinese factory growth sluggish in September
* Futures down: Dow 127 pts, S&P 15.6 pts, Nasdaq 26 pts
By Ryan Vlastelica
NEW YORK, Sept 30 U.S. stock index futures fell
on Monday as a last-minute deal to resolve a budget battle in
Washington appeared less likely, increasing the chances of a
* The House of Representatives early on Sunday voted for an
emergency spending bill that includes a delay of President
Barack Obama's signature healthcare reform law despite threats
of a veto from the White House.
* While a deal could be reached before the government's
fiscal year ends at midnight on Monday, the unanimous passage of
a bill to continue paying U.S. soldiers in the event the
government runs out of money was viewed as a sign that there
would be no agreement between Republicans, who hold a majority
in the House, and the Democrats, who control the White House and
* Such a shutdown would have wide-ranging implications for a
range of asset classes. If a deal is reached quickly, markets
might recover, but a prolonged shutdown could have significant
implications for economic growth and consumer confidence.
* Many government employees will be furloughed by the
absence of a deal, and the Labor Department will not issue its
monthly employment report scheduled for next Friday.
* Essentially all market sectors could see a reaction, with
industries tied to the pace of economic growth - including
energy and banking - seeing outsized impacts. Even utilities,
which are considered a defensive group, may see steep moves if a
shutdown impacts interest rates.
* S&P 500 futures fell 15.6 points and were below
fair value, a formula that evaluates pricing by taking into
account interest rates, dividends and time to expiration on the
contract. Dow Jones industrial average futures slid 127
points and Nasdaq 100 futures lost 26 points.
* The S&P 500 is currently 0.7 percent above its
50-day moving average of 1,680.18, a level that has been serving
as support, but the index is likely to break below it in the
event of major uncertainty. The next key level is the index's
100-day average of 1,659.29, 1.9 percent below current levels.
* Historically, Wall Street has managed to weather similar
incidents. During the federal government shutdown from Dec. 15,
1995, to Jan. 6, 1996, the S&P 500 added 0.1 percent. During the
Nov. 13 to Nov. 19, 1995, shutdown, the benchmark index rose 1.3
percent, according to data by Jason Goepfert, president of
* That precedent may not hold this time given that growth
continues to lag. Wall Street may also be ripe for a selloff
given that the S&P is near an all-time high and has seen little
in the way of a sustained pullback this year.
* For the month of September, the Dow is up 3
percent, the S&P is up 3.6 percent and the Nasdaq is up
* Overseas, China's factory sector grew only slightly in
September as domestic demand faltered, a private survey showed,
an unexpectedly weak outcome that suggests a firm rebound in
Asia's economic powerhouse still remains elusive.
* In Europe, a split in Italy's ruling coalition has
heightened the prospects of fresh elections that could delay
economic reforms. Ten-year Italian government bond yields
jumped for a third straight day.