Dow falls 185 as shutdown threat slams stocks

Stocks sell off after the House votes to defund Obamacare, setting up a showdown between Senate Democrats and the Obama administration.

By Charley Blaine Sep 20, 2013 3:54PM
Trading floor © Digital Vision Ltd./SuperStockUpdated: 5 p.m. ET

Stocks tumbled Friday afternoon after the House of Representatives approved a bill to fund the government until the end of the year -- but only if the  Affordable Care Act is defunded.

The Dow Jones industrials ($INDU) suffered its worst loss in more than a month. Friday's loss was bigger by nearly 40 points than the blue chips' 147-point gain that resulted from the Federal  Reserve's Wednesday decision not to trim back its bond-buying program.

With the vote, odds of a government shutdown after Sept. 30 have increased sharply. So has the possibility that the nation's debt ceiling wont be increased, triggering a potential default. "Anything that smacks of a government shutdown is bad for the market," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Va.

The bill goes to the Senate, which will probably turn it down. If it gets to President Obama, he has promised to veto it.

The Dow closed down 185 points to 15,451, its worst one-day loss since Aug. 15. The Standard & Poor's 500 Index ($INX) had dropped 12 points to 1,710, and the Nasdaq Composite Index ($COMPX) had lost 15 points to 3,775.

The sell-off cut the stock market's gains for the week substantially. The Dow was up 0.7% for the week. After Wednesday's close, the blue chips had been up 2% for the week. The S&P 500 gained 1.3%; it had been up more than 2.2%. The Nasdaq gained 1.4%; it had been up nearly 1.7%.

For September, the Dow is up 4.3%, with the S&P 500 up 4.7% and the Nasdaq up 5.2%. For the year, the blue chips have gained 17.9%, while the S&P is ahead 19.9% and the Nasdaq sporting a 25% gain.

The big question is if Friday's sell-off is a one-off event or something more serious. Tuz thinks the shut-down threat and the potential of a debt default later in the fall could trigger a long-anticipated sell-off of perhaps 6%.

Stocks were off modestly until about 10:45 a.m. when it became apparent how the House vote would go. Selling was steady until about 3:15 when the market appeared to stabilize.

The selling was exacerbated when James Bullard, president of the St. Louis Federal Reserve Bank, said the Fed might taper its bond-buying in October.

In addition, there was a re-weighting in the S&P 500, and three stocks were leaving the Dow after Friday. Bank of America (BAC), Alcoa (AA) and Hewlett-Packard (HPQ) leave the index, to be replaced by Goldman Sachs (GS), Nike (NKE) and Visa (V).

The selling in stocks was mirrored in commodities. Gold (-GC) fell $36.80 to $1,332.50 an ounce. Crude oil (-CL) in New York dropped $1.11 to $104.75 a barrel. The national average price of a gallon of gasoline fell to $3.491 from $3.494 on Thursday, according to AAA's Daily Fuel Gauge Report.

Smartphone maker BlackBerry (BBRY) shares were down $1.80 to $8.73. The company warned it will report a loss of nearly $1 billion in its fiscal-second quarter. Revenue will be about $1.6 billion, about 48% lower than the consensus estimate. It will also lay off 4,500 workers.

The big question is if the company can survive the intense competition from competitors like Samsung, Apple (AAPL) and Microsoft (MSFT). (Microsoft is the publisher of MSN Money.)

BlackBerry, the renamed Research In Motion, is scheduled to report results on Sept. 27.

Only three of the 30 Dow stocks were higher: pharmaceutical giant Pfizer (PFE), up 13 cents to $28.97; Coca-Cola (KO), up 9 cents to $39.40; and JPMorgan Chase (JPM), up 5 cents to $52.80.

The laggard was Caterpillar (CAT), down $3 to $84.75 after reporting that global sales from its dealers fell in the last three months. The maker of construction and mining equipment said that total world machine orders were down 10%. That was came after a 9% decline in July and an 8% drop in June. Only North American sales showed growth.

Meanwhile, only 87 S&P 500 stocks were higher, led by Teradata (TDC) and Netflix (NFLX). The laggards were Olive Garden-parent Darden Restaurants (DRI) and aerospace-equipment maker Rockwell Collins (COL), down $4.22 to $70.06. Darden is struggling to see restaurant sales grow. Rockwell was lower because of federal budget worries.

Facebook (FB), Tesla Motors (TSLA) and Netflix led the Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks. The index fell 13 points to 3,225 with only 35 stocks showing gains on the day.

Health-insurance provider Cataraman (CTRX) and gold producer Randgold Resources (GOLD) were the laggards.

Health-insurance stocks were hit hard this week by the potential that Obamacare might be threatened. The Morgan Stanley Healthcare Payor Index (HMO) fell 5.7%.

More from Top Stocks
Sep 20, 2013 4:15PM
Anyone else sick of the grandstanding BS.
They will pass a small deal and kick the can down the road, end of story.
Sep 20, 2013 4:25PM

A US SOLDIER: You notice we can always afford war, but not healthcare like other industrialized

nations.These last 2 wars,after the VA benefits for the next 30 years will end up costing us

billions if not trillions.

Sep 20, 2013 4:21PM
I am Republican and some times you just have to let things go and move on.  Enough with Obamacare already move on.  Time to make the donuts...all the time, money, energy and effort could have been used to sky rocket my portfolio!  Not to mention the US.
Sep 20, 2013 4:16PM
Everybody knew that Wall Street would Pee Their Pants and get people to worry that the Nation would fall apart!!!  And what is no surprise is that all the investors fell for it hook, line and sinker!  Stupidity as they say breeds stupidity!!!!!!!
Sep 20, 2013 4:19PM
It's NOT a "government shutdown" !!!!!! The Bill SPECIFICALLY shows that funds are and will be for ALL of the usual government services EXCEPT the "Affordable Care Act" !!!!! Keep pushing your agenda MSN!
Sep 20, 2013 4:25PM
What a joke.  If somebody important farts it moves 30 points!
Sep 20, 2013 4:25PM
It's not often that I call an article 100% garbage but that's what this is.  Two articles posted at the same time - one says stocks tumble after investors "digest" fed's comments; the other says stocks dive over threat of government shut down.  This is so typical of MSNBC - they don't have a clue.  Stocks are simply readjusting for a day.  We all know the government isn't going to shut down, or if it does it won't impact anything in the long run.  Obamacare will still be there to empty our bank accounts and destroy or free choice and our tax money will continue to be thrown away.  Congress and the President don't work for us, they work for themselves and the stock market is only interested in free money.
Sep 20, 2013 4:24PM
Wall Street always goes down on a non event, They close out this week looking awfully stupid to its investers!! The government has a 1% chance of shutting down Who do they think they are bluffing?? As far as comment from a Fed statement. They are only a comment!!!
Sep 20, 2013 4:31PM

Meanwhile, the GOP Congressmen enjoy the best healthcare your tax-dollars can buy...but we're not considered worthy...

We know who they really represent, and we vote. 

Sep 20, 2013 4:59PM
I am so tired of all the grandstanding in Washington between the Republicans and Democrats, why cant they just do something for the good of the country and learn to work together......
Sep 20, 2013 4:38PM
The stock market is inflated anyway because of quantitative easing.  It's a bubble that will burst as soon as the fed knocks off it's wall street subsidy.  Shrink it now and the burst won't be as bad next year.
Sep 20, 2013 4:25PM
Just get the bond tapering on the road.  We all know it's coming and should be completed by end of June 2014.  The longer the Fed waits, the larger the sequential tapers and the steeper the market will fall.
Sep 20, 2013 4:36PM
You mean this this will eventually shut down a dysfunctional Government. We need this at least 3 times every quarter
Sep 20, 2013 4:23PM
This crap is crazy...stocks up and down because of news but news is news everything still goes on as usual....if people stop listening to the news and just go about their business everything will be fine...stop panic its just news.  We all still going to do the same thing regardless of what is does not change anything...continue about your business and you will see....Governement doesnt run us we run the government.
Sep 20, 2013 4:20PM

A fair value for the Dow is 12,250 +/-

For the S&P: 1,375 +/-

And this is an optimistic estimate.

Everything else is froth.

Sep 20, 2013 4:33PM
I'm so tired of the left/right haggling. What needs to happen is the Senators/House Reps STOP spending. Its not just entitlement programs, its not just the SNAP program, its not just the housing assistance programs, its the reckless spending all the time by folks who are no longer accountable to their constituents. Why do they get such large meal stipends? such large travel stipends? such large lodging stipends? Why are they allowed to pass laws for the people, yet can exempt themselves?  No one wants to face the truth, but the United States of America is becoming Orwell's "Animal Farm". The "pork" added to each and every bill is astonishing. Why have we allowed this?  If I were President, I would VETO all bills that were not "one issue". Don't send me a bill on Hurricaine Sandy relief with other spending attached to it! Don't attache special project funding to important legislation that have nothing related. Our government is out of control and spend like drunken sailors (Please accept my apologies to any drunken sailors out there, I did not mean to offend you by the comparison). Its time to stop all this hypocracy NOW. We the tax payers (ok, those of us who do pay should not have to put up with this ANY LONGER! Ok, I'm done, back to work to pay for the politicians late night meals, expensive wine, 1st class travel and lodging.
Sep 20, 2013 5:00PM
this bs makes me want to move to canada
Sep 20, 2013 5:06PM
Thanks GOP.

You wont even exist in 20 years.

Sep 20, 2013 5:10PM
Ok, so there was an election and Obama was voted in, He passes the affordable care act! He was then REELECTED! Then the republican led house voted 43 times to repeal Obama care and lost EVERY time. Then the conservative supreme court rules that The Affordable care act is Constitutional! Now the republicans want to shut down the Gov. to defund the ACA. They are acting like a bunch of spoiled brats. We will see how well this works for them in 2014! Remember when the republicans did it in 1996 when Bill Clinton was president? That did not work in the republicans favor then either!
Sep 20, 2013 4:37PM

Once again BS on why the market went down. The market went down because the big boys sold off in order to steal some more of our 401K money that happens to be the only money around these days.


Wake up America it is time to beat the s--- out of these low life thieves.

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