Stocks Fall Amid US Debt Drama

During the first six days of
the government shutdown, investors had a relatively indifferent attitude toward the drama in Washington. But as a critical October 17 deadline approaches, stocks continue to fall.
CNN reports that the Dow Jones industrial average, the S&P 500, and the Nasdaq closed down nearly 1per cent Monday.
Several analysts say that a sharp sell-off in stocks could be the one thing that pushes congress to act swiftly. So far, stocks have been holding up pretty well.
“A resilient stock market and a cloudy economic picture increase the risk of an extended shutdown in our view,” Bank of America analysts wrote in a report over the weekend.
The government shutdown is in day 7, and lawmakers appear no closer to resolving the impasse. Treasury Secretary Jack Lew said Sunday that Congress was “playing with fire,” with the possibility of a U.S. default only a little over a week away.
Deutsche Bank analyst David Bianco thinks the lack of a debt resolution will drag on the S&P 500 this week, but says there’s little chance that the U.S. will default. However, if it does, Bianco says the S&P 500 could sink 45 per cent.
That echoes the sentiment of ETX Capital market strategist Ishaq Siddiqi, who said the debt ceiling debacle could lead to a “subsequent meltdown of global asset prices.”
Last week, Bank of America analysts said the government shutdown wouldn’t impact fourth-quarter GDP growth. But over the weekend, they changed their tune and lowered growth estimates for the fourth quarter to a 2 per cent annual rate from 2.5 per cent.
The first corporate results for the third quarter come out Tuesday, when aluminum maker Alcoa reports after the market close.
Bank stocks, including JPMorgan, Bank of America, Citigroup, and Goldman Sachs, dropped nearly 2 per cent. Analysts fear that weak third-quarter earnings could also weigh on stock prices.
Shares of Apple rose after the phone maker was upgraded by Jefferies analyst Peter Misek.
Shares of BlackBerry gained nearly 4 per cent  on talk that new buyers are emerging for the troubled smartphone maker. The buyers, according to reports, could consider buying Blackberry in parts. That’s giving investors at least some hope that a deal may actually get done.
But some traders noted that looking at BlackBerry is a far cry from buying it.