With two hours remaining before tonight's midnight deadline, the government seemed almost entirely assured of shutting its doors. Just before 9:00 p.m., the House sent a bill back to the Senate with a one-year delay on the individual mandate and a rider denying federal subsidies to members of Congress and the White House administration along with their staff. Both Senate Majority Leader Harry Reid and President Obama have said repeatedly that they would not accept anything short of a clean budget bill, and the Senate has promised to again strip out the Obamacare language and send it back to the House. At 9:30 p.m., the Senate did just that, sending a clean bill back to the House. Commenting on the standoff, Reid said of House Republicans, "They've lost their minds."
In the latest sign of global reaction to the crisis, the Japanese Nikkei held steady and was actually up 0.6% at press time, though a strong manufacturing report seems to have boosted shares. Chinese markets were closed for a holiday, and the dollar remained stable against foreign currencies. Earlier in the day, world markets fell, and the Dow Jones Industrial Average (^DJI +0.04%) closed down 129 points, or 0.8%, its seventh decline in eight days.
Most economists suggest that the impact of a government shutdown would be relatively minor. Macroeconomic Advisers has estimated the GDP would only decline by 0.3% over a two-week shutdown while Mark Zandi of Moody's Analytics predicted the hit would be 1.4%, or $55 billion, for a closure of three to four weeks. For investors, the greater concern is the coming debt ceiling deadline on October 17 as the consequences for a never-before-seen default would be devastating. During the last government shutdown in 1995-96, stocks gained, but the economy was much stronger then.
Though mostly ignored, there was other news in the market today. The Chicago PMI showed strong growth in manufacturing as the index jumped to 55.7 from 53.0 a month ago, and beat estimates of 53.7. With the government shutdown likely, investors will have to adjust to a lack of economic data as federal agencies will not be making their usual reports, including this Friday's jobs figures.
Procter & Gamble (PG +0.63%) was the Dow's biggest loser, falling 2.1% after rival Unilever (UL 0.60%) said sales were slowing in its most recent quarter. The parent of Dove soap and Ben & Jerry's ice cream said revenue was on track for a 3%-3.5% increase this quarter, down from a former projection of 5%. Considering Unilever has outperformed P&G recently, the news seems to be especially foreboding for the Tide maker as it's had problems expanding its top line.
Elsewhere, Coca-Cola (KO +0.01%) lost its vaunted status as the world's No. 1 brand, according to research firm Interbrand. The beverage maker had held the title for more than a decade, but slipped to No. 3 as Apple claimed the top spot and Google moved up to No. 2. While the ranking may not mean anything significant for Coke's future, it is a reminder of the primacy of tech brands in today's world and the growing loyalty consumers feel toward them, perhaps in the place of other sectors. Interbrand saw just a 2% increase in Coke's brand value, compared to 28% for Apple.
