Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
The deadline for the government shutdown is now just days away. That may be causing some investors to panic and sell shares, as they believe the whole world will come to an end if Congress can't get its act together by Oct. 1. But that won't happen. First, let's assume that the federal government will shut down (which it won't). Does that mean the average business will also close its doors? Will Wal-Mart stop selling groceries? Will Bank of America stop cashing checks? Will Exxon stations no longer have gasoline in their tanks? No, no, and no.
None of those things will happen if -- and that's a big "if" -- the federal government shuts down. Businesses all over the U.S. and the world will continue selling products and services, while customers all over the world will still buy products and services. So, with the Dow Jones Industrial Average (INDEX: ^DJI) down by 0.48% as of 12:45 p.m. EDT today and the S&P 500 and NASDAQ down 0.41% and 0.1%, respectively, it's clear investors are acting irrationally, so use this as a good buying opportunity.
Which Dow components could you pick up on the cheap?
Shares of both Verizon and IBM are down by 1.7%, while Coke and Procter & Gamble have lost about 1.2% apiece, and these losses are mostly unfounded. However, that's not to say that all of the Dow's losers today are deals. Let's look at a few that have reason to move south.
While most businesses around the world wouldn't so much as flinch from a shutdown, there are one or two Dow components that investors should watch out for in the case of a government shutdown. Both Boeing (NYSE: BA) and United Technologies (NYSE: UTX) do a good deal of business with the government and would likely see big cuts from that customer if the unlikely shutdown occurred. Shares of Boeing are down 0.9% at the time of writing, while United Tech is lower by 0.5%. But investors need to remember that nearly all the business these two companies do with the government is defense-related, so while funding would take a hit, it wouldn't completely fall off the map. We saw this with the sequester cuts -- United Tech and Boeing saw slight reductions to their contracts -- but contracts have still been rolling in. National defense doesn't simply vanish, so the equipment needed to effectively defend this U.S. will remain in demand. Again, these companies could present buying opportunities if the prices fall far enough.
Shares of Goldman Sachs (NYSE: GS) are down 1.3% after an analyst at Guggenheim downgraded the stock from buy to neutral. Additionally, the firm cut its price target to $183. The main reason given for the rating change was that the firm feels a decline in interest rates could hurt the capital market's income. Goldman also had its third-quarter EPS estimates cut by Brad Hintz of Sanford C. Bernstein due to fears of declining trading revenue. Hintz also cut Morgan Stanley's EPS estimate for the same reason.
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