* Possibility of budget deal before midnight seen as remote
* All S&P 500 sectors fall, energy and financials drop
* Major indexes still on track for positive September
* Indexes down: Dow 0.9 pct, S&P 0.8 pct, Nasdaq 0.8 pct
By Ryan Vlastelica
NEW YORK, Sept 30 U.S. stocks fell sharply on
Monday as a last-minute deal to resolve a budget impasse in
Washington appeared less likely, increasing the chances of a
partial government shutdown.
Losses were broad, with all ten S&P 500 sectors lower on the
day, led by energy and financials shares. About 80 percent of
companies traded on both the New York Stock Exchange and Nasdaq
The House of Representatives early on Sunday voted for an
emergency spending bill that includes a one-year delay of
President Barack Obama's signature healthcare overhaul despite
threats of a veto from the White House.
A shutdown would have wide-ranging implications for a most
types of assets. If a deal is reached quickly, markets might
recover, but a prolonged shutdown could do significant harm to
the economy and consumer confidence. While a deal could still be
reached before the government's fiscal year ends at midnight on
Monday, such a possibility was considered unlikely.
Up to 1 million government employees could be furloughed by
the absence of a deal, and if the shutdown takes place, the
Labor Department will postpone issuing its closely watched
monthly employment report scheduled for Friday.
"The government is such an important part of the entire
economy, between the people it employs and the impact it has on
consumer confidence," said Nicholas Colas, chief market
strategist at the ConvergEx Group in New York. "The size of the
selloff is logical given the stakes."
Energy shares slumped 1.1 percent, dropping
alongside a 1.5 percent fall in crude oil prices. Exxon Mobil
fell 1.3 percent to $85.79 while Occidental Petroleum
sank 1.6 percent to $92.93.
Financial shares were also lower, falling 1 percent.
Goldman Sachs dropped 1.8 percent to $156.94 and
Citigroup Inc was off 1.7 percent at $48.04.
The Dow Jones industrial average was down 142.57
points, or 0.93 percent, at 15,115.67. The Standard & Poor's 500
Index was down 13.13 points, or 0.78 percent, at
1,678.62. The Nasdaq Composite Index was down 30.16
points, or 0.80 percent, at 3,751.43.
The S&P broke under its 50-day moving average of 1,679.88,
which had been serving as support. The next key level is the
index's 100-day average of 1,659.29, 1.9 percent below current
Wall Street has managed to weather similar incidents in the
past. During the 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 SentimenTrader.com.
That precedent may not hold this time, given that economic
growth continues to be weak. Wall Street may also be ripe for a
selloff, with the S&P near an all-time high and having escaped
any sustained pullback this year.
For the month of September, the Dow is up 2 percent,
the S&P is up 2.7 percent and the Nasdaq is up 4.4
The Chicago Purchasing Managers index rose more than
expected in September, climbing to 55.7 from 53 in the previous
month. Analysts were expecting a reading of 54. The positive
data had little lasting impact on the market's gloomy tone.
In company news, Active Network Inc jumped 26
percent to $14.37 after the company said it would be taken
private by Vista Equity Partners for $1.05 billion.
Overseas, China's factory sector grew only slightly in
September as domestic demand faltered, a private survey showed.
It was an unexpectedly weak outcome that suggests a firm rebound
in Asia's economic powerhouse 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.