* 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 14.5 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.
A deal could be reached before the government's fiscal year
ends at midnight on Monday. However, 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.
Essentially all market sectors could see a reaction, with
industries tied to the pace of economic growth - including
energy and banking - seeing outsized impact. Even utilities,
which are considered a defensive group, may see steep moves if a
shutdown affects interest rates.
"Dysfunction creates a climate of risk that's agnostic of
sector or index; we'll have a pretty broad selloff that's fairly
equal across the market," said Art Hogan, managing director at
Lazard Capital Markets in New York. "The market is not going to
react positively in the near term or over any period where we do
see a shutdown."
Among the most active premarket movers, Bank of America
fell 1.5 percent to $13.69 while U.S. Steel Corp
lost 1.9 percent to $20.05.
Many government employees will be furloughed by the absence
of a deal, and if the shutdown takes place the Labor Department
will not issue its closely watched monthly employment report
scheduled for Friday.
S&P 500 futures fell 13.7 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.
Wall Street has managed to weather similar incidents in the
past. 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 economic
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.
"Historically shutdowns have been buying opportunities, but
you don't have to jump in right now," said Hogan. "Even if there
is a deal today, we have the debt ceiling debate coming up, and
that will likely be just as acrimonious."
For the month of September, the Dow is up 3 percent,
the S&P is up 3.6 percent and the Nasdaq is up 5.3
In company news, Active Network Inc jumped 27
percent to $14.45 in premarket trading after the company said it
would be taken private by Vista Equity Partners for $1.05
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.
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.