Stocks Are Down as Politicians Are At It Again

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If you thought politicians were done meddling in the markets after last year's fiscal-cliff saga, then think again. Stocks are broadly lower today as policymakers in both Europe and Washington engage in yet more rounds of political brinksmanship. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 67 points, or 0.48%.

They're baaaaack...
You don't need to see the film Poltergeist II to appreciate the menacing connotations of these two words; just cast your eyes upon policymakers in Washington and Europe.

On Friday, barring last-minute intervention by Congress, $85 billion in across-the-board spending cuts are set to take effect at the federal government level. This drop, known as the "sequester," was conceived during the 2011 debt ceiling showdown that ultimately cost the United States its unblemished credit rating.

While the sequester was believed at the time to be "so drastic that it would force the two [political] parties to compromise," as my colleague Alex Dumortier discussed earlier today, "it would appear that it wasn't drastic enough, as no compromise is in sight."

Elections in Italy, meanwhile, are causing some to question whether the Mediterranean country will keep its austerity measures in place. While exit polls from this morning suggested that Pier Luigi Bersani's market-friendly, center-left coalition government had a "commanding lead," the picture changed dramatically as the day wore on. It now appears that Italy will have to contend with a divided parliament, potentially putting its fiscal promises to the continent at risk.

As a market analyst put it to Bloomberg News: "A hung parliament would be a guarantee of paralysis both in terms of economic program and structural reforms. Such a scenario would be the worst-case outlook."

Today's winners and losers
In terms of individual companies, McDonald's and Wal-Mart (NYSE: WMT  ) are among the few blue-chip companies making gains in the final hour of trading, up 1.4% and 0.9%, respectively.

Both companies are considered defensive stocks thanks in part to their respectable dividend payouts. McDonald's will begin trading ex-dividend on Wednesday, and Wal-Mart recently made it on the Dividend Channel's S.A.F.E. 25 list. As fellow Fool Jessica Alling pointed out this morning, the list is "reserved for stocks that have solid dividend returns, continued dividend growth, 'flawlessness' (meaning no missed or lowered dividends), and a long history or paying dividends."

Leading the Dow lower, alternatively, are shares of Bank of America (NYSE: BAC  ) and Boeing (NYSE: BA  ) . Shares of the nation's second-largest bank by assets have struggled of late, falling 8% since the beginning of last week. Much of the decline can likely be traced to profit-taking by institutions after B of A proved the best-performing component of the Dow last year. In addition, there continue to be mixed signals out of the housing market that could impact the bank's profitability going forward.

With respect to Boeing, The Wall Street Journal reported today that executives at the company asked aviation authorities to allow its flagship aircraft, the 787 Dreamliner, to fly again after the plane was grounded due to battery fires. In response, the Federal Aviation Administration reiterated that the 787 can't return to service "until officials are confident safety risks over the jetliner's lithium-ion batteries have been addressed."

Finally, the biggest outlier in the market today is Barnes & Noble (NYSE: BKS  ) . The bookseller reported today that its chairman and biggest shareholder, Leonard Riggio, may attempt to purchase the retail division, which is made up of the brick-and-mortar stores. Word of the news has sent shares soaring more than 12% at the time of writing.

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Comments from our Foolish Readers

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  • Report this Comment On February 25, 2013, at 3:38 PM, oilpatch71 wrote:

    How long are people going to put up with these worthless lawmakers?

  • Report this Comment On February 25, 2013, at 8:20 PM, claudea2 wrote:

    Investor are always looking for a crystal ball, well the politicians as given us one, the sequester will happen. The Democrats hope the Republicans will rush to offer a compromise to undo the damage but the Republicans believe the damage will undo itself in the long run with smaller government and less taxes thus voiding the need for a compromise. So lets rush to the sidelines and start re-investing next week or when the bottom is in sight.

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9/28/2016 2:50 PM
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Bank of America CAPS Rating: ****
BKS $10.94 Up +0.06 +0.51%
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WMT $71.84 Down -0.49 -0.68%
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