Wall Street stocks plummet as budget fight fears loom
NEW YORK — Washington’s budget fight jolted Wall Street yesterday (Sept 20), reminding it that the next few weeks could bring a lot of uncertainty.
Investors hate uncertainty, and stocks plunged in afternoon sell-off that wiped out all the gains from rally earlier this week, when the United States Federal Reserve kept its huge economic stimulus program intact.
Major indexes were mixed in morning trading, but turned lower around midday after the US House of Representatives voted to defund President Barack Obama’s health care law.
The vote itself wasn’t a surprise, but it reminded investors that the Republican-led House and the Democratic-controlled Senate are poised for a showdown over federal spending.
The debt ceiling must be raised by Oct 1 to avoid a government shutdown, and a potential default on payments, including debt, later in the month.
“What we’ve done is basically committed ourselves to two weeks of worry,” said Mr Sam Stovall, chief equity strategist at S&P Capital IQ.
The Dow Jones industrial average dropped 185.46 points, or 1.2 per cent, to close at 15,451.09 — 225 points below its all-time closing high reached Wednesday after the Fed’s announcement.
The Standard & Poor’s 500 index fell 12.43 points, or 0.7 per cent, to 1,709.91. The Nasdaq composite fell 14.66 points, or 0.4 per cent, to 3,774.73.
All 10 industry groups in the S&P 500 fell, led lower by telecom companies and utilities. The S&P also fell on Thursday, making this its first two-day decline in almost three weeks.
Until now, September defied the worriers. The stock market has bounced backed from an August swoon, despite a calendar loaded with potential rally killers.