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Stocks had their worst day today since peaking on Sept. 18 as the vitriol in Washington intensified over the government shutdown and the debt limit. As a result, the Dow Jones Industrial Average (DJINDICES: ^DJI ) fell 160 points, or 1.1%, while the S&P 500 and the Nasdaq both fared worse, sliding 1.2% and 2%, respectively.
President Obama called an impromptu press conference this afternoon to again demand that Speaker Boehner and House Republicans pass "clean" bills to reopen the government and raise the debt limit, calling the Republican maneuvers "threats." The president had called Boehner earlier in the day to ask him to put the Senate resolution to fund the government to a floor vote on the House, but Boehner insisted that Obama negotiate with him as both parties stuck to familiar arguments. Obama offered to make a short-term deal and then negotiate, but Boehner immediately dismissed it. With the federal government now closed over a week, and a potential default only nine days away, both sides in Washington appear to be moving further away from an agreement, not closer. It's seems that an 11th-hour agreement, as we've seen before, to allay the default is the most likely solution.
Adding insult to injury, the International Monetary Fund again cut its world growth forecast, as it's done in nine of its past 10 updates, revising it from 3.2% to 2.9% for this year and from 3.8% to 3.6% next year. Among other factors, the international lender cited fiscal uncertainty in the U.S. as holding back economic growth. IMF officials said the legislative standoff and the potential default will be a central focus of their meeting in Washington this week.
On the Dow today, Visa (NYSE: V ) led the losers for the second straight session, falling 2%, after a report yesterday said that credit card spending declined for the third straight month. It was also hit by concerns that a continuing government shutdown and worries about the debt limit could be a damper on further consumer spending.
Shares of Wal-Mart (NYSE: WMT ) , meanwhile, were moving against the current, climbing 1.4% as a reports circulated that the retail giant is looking into making acquisitions in Chinese cities where it does not already dominate the market. With a recent setback to its plans to expand in India, the China opportunity could provide an even stronger growth channel as acquisitions may be the quickest way to step up its presence in the world's No. 2 economy.
Finally, reports broke tonight that Obama will nominate Janet Yellen to serve as the next Fed chairman, which was widely expected after Larry Summers withdrew his name from consideration. Since Yellen favors the loose monetary approach seen in Ben Bernanke's quantitative-easing programs, investors are likely to cheer her nomination. However, with dysfunction in Washington dominating the markets and her nomination already anticipated, investor response may only be tepid tomorrow. Chairman Bernanke's term ends in January.
Tick-tock goes the debt clock
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