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.
After Congress was unable to make a budget deal over the weekend, anxiety is growing and stocks are flat just three days before the Oct. 17 deadline at which the Treasury Department says the nation will hit its debt ceiling.
As of 1 p.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI ) is down a single point, having recovered from losses of up to 101 points earlier in the session. The S&P 500 sits perfectly flat, while the NASDAQ is up by a modest 0.24%. Although the Dow has rallied back today, about half of its 30 component stocks are still in the red at this time. Let's take a look at a few of the bigger losers today and why they're heading south.
Shares of two of the Dow's industrial giants, General Electric (NYSE: GE ) and United Technologies (NYSE: UTX ) are down about 0.5% each. GE is scheduled to report earnings on Friday, while United Tech is scheduled to report next Tuesday. Investors could be getting nervous over how the government shutdown has affected the two organizations. While it's unlikely that either company's third-quarter results will have been affected by the problems in Washington, forward guidance and managements' discussions during their quarterly conference calls should give investors a better understanding of how each company has been impacted by the shutdown. Current investors should hold off on making any dramatic decisions, as the shutdown and debt-ceiling situation are both likely to be short-term problems that will not materially affect either company for the long run.
The Dow's banking stocks are also falling behind today: Shares of both Goldman Sachs (NYSE: GS ) and JPMorgan Chase (NYSE: JPM ) are down 0.6% and 0.3%, respectively. With JPMorgan already having reported earnings and Goldman slated to announce third-quarter results on Thursday (the same day we hit the debt ceiling), both banks are dealing with their own problems. JPMorgan and CEO Jamie Dimon were both taken down a peg last week when the bank reported a $7.2 billion charge related to legal fees during the quarter. This was the first time the bank had reported a loss since 2004 -- and the first during Dimon's tenure. It doesn't seem the legal problems will easily go away, so shareholders should at least prepare themselves for further losses or reduced profits in the coming quarters.
Goldman Sachs is also dealing with a set of its own problems, including rising interest rates. All the talk of how the U.S. credit rating could fall if the debt ceiling is hit, pushing interest rates higher across the board, is something anyone invested in the banking industry should be watching, as the banks' balance sheets, financials, and businesses will all be affected by higher rates in both the long term and the short term. Remember also that the Federal Reserve is still buying $85 billion worth of bonds each month; that will not last forever, and its cessation will eventually send rates upward.
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