Dow Futures Fall as Debt Default Prospects Rise

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

According to stock index futures as of 7 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) will open significantly lower, falling by 120 points at the start of trading. An unprecedented national debt default looks more likely this morning after political leaders talked past each other over the weekend.

House Speaker John Boehner told ABC news that the nation was on a path toward default if President Obama didn't concede to negotiations. For its part, the administration said Congress was "playing with fire" by refusing to raise the debt ceiling quickly. Regardless of the specific demands, the bad news is that the debt ceiling issue has apparently become wrapped up in the contentious government shutdown debate, making it less likely that either problem will be solved quickly.

With those bigger trends in mind, here are a few individual stock stories to watch for in today's market.

Boeing (NYSE: BA  ) could see active trading today after rival Airbus muscled into one if its key markets. Airbus landed a first-ever order from Japan Airlines worth more than $9 billion. Boeing has dominated the Japanese market for decades, most recently boasting an 80% market share. However, that dynamic looks set to change since the company struggled to deliver its Dreamliner aircraft on time and free of technical issues. Boeing's stock is down 1.4% in premarket trading.

Outside the Dow, Amazon.com (NASDAQ: AMZN  ) shares could see selling pressure after Barron's argued over the weekend that the stock looks expensive, even assuming it manages to meet Wall Street's growth expectations for the coming years. A 10% annual return on the stock from here would require 20% sales growth in each of the next four years, but it could still leave shares richly priced at more than 40 times earnings in 2016, according to Barron's. Amazon shares are down 1.1% in premarket trading.

Finally, Warren Buffett's investments from the financial-crisis days have netted his company a cool $10 billion, according to a tally from The Wall Street Journal. The Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) CEO reached that mark last week after Mars paid back a 2008 loan with $4.4 billion. Still, Buffett maintains that you didn't need billions in the bank to profit during those down days. "In terms of simple profitability, an average investor could have done just as well investing in the stock market if they bought during the panic period," he said in an interview. That's fine advice for investors, particularly as volatility looks set to spike over the coming days.

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  • Report this Comment On October 07, 2013, at 2:46 PM, ET114 wrote:

    Debt default... you must be kidding... Every realistic econ guru states: The Treasury recv's $200+ billion EVERY month, no need for default, might have to alter payment, buy no default... Further more, by far the major holder of debt is We The People... Fed has sold the majority of the debt to US financial institutions which holds $17+ trillion of We The People's cash, savings, IRAs and 401Ks... China is a distant 3rd in US debt...

  • Report this Comment On October 07, 2013, at 2:51 PM, TMFHousel wrote:

    <<Every realistic econ guru states: The Treasury recv's $200+ billion EVERY month, no need for default, might have to alter payment, buy no default>>

    The Treasury has received less than $200 billion of tax revenue in 7 of the last 12 months. Revenue is very lumpy, ranging from $100 billion a month to more than $400 billion a month in given years. The default issue arises when the Treasury has, say, a $50 billion interest payment due and less than that in tax revenue coming in that particular day.

    http://www.fms.treas.gov/mts/mts.pdf

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