Ongoing Government Shutdown Leads To Sell-Off On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Tuesday, extending the notable downward move seen in the previous session. Worries about the impact of the ongoing government shutdown continued to weigh on the markets.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 159.71 points or 1.1 percent to 14,776.53, the Nasdaq plummeted 75.54 points or 2 percent to 3,694.83 and the S&P 500 plunged 20.67 points or 1.2 percent to 1,655.45.

The sell-off on Wall Street came as lawmakers remain at an impasse even as the government shutdown enters its second week, with Democrats and Republicans seemingly digging in their heels rather than taking steps toward an agreement.

While Democrats have challenged House Speaker John Boehner, R-Ohio, to bring a "clean" spending bill to the floor for a vote, Republicans continue to demand concessions from the White House.

Boehner continued to try to put the blame for the shutdown on President Barack Obama and Senate Democrats in remarks at a press conference with Republican leaders.

The House Speaker continued to press the Democrats to come to the table and work with Republicans, arguing that Democrats' refusal to negotiate is putting the country on a dangerous path.

Meanwhile, Obama reiterated that he will negotiate with the GOP but only after the threats of government shutdown and default have been removed.

Obama also once again urged the Speaker to hold a vote on the Senate-passed bill that would re-open the federal government immediately.

In a potential ray of hope, Obama indicated that he would be willing to begin negotiations with Republicans even after only short-term spending and debt limit bills are passed.

The president suggested that the bills could include an outline of the negotiations process to provide cover for Republicans on raising the debt ceiling.

Partly citing the policy challenges in the U.S., the International Monetary Fund trimmed its global growth forecasts for this year and next.

In its latest World Economic Outlook, the IMF cut its growth forecast for this year to 2.9 percent from 3.1 percent seen in July. The outlook for 2014 was also lowered to 3.6 percent from 3.8 percent.

Sector News

While most of the major sectors showed notable moves to the downside, biotechnology stocks posted particularly steep losses on the day. The NYSE Arca Biotechnology Index plunged by 4.6 percent to its lowest closing level in over a month.

Exact Sciences (EXAS) and InterMune (ITMN) turned in two of the biotech sector's worst performances, tumbling by 11.3 percent and 8.8 percent, respectively.

Substantial weakness was also visible among internet stocks, as reflected by the 3.2 percent loss posted by the NYSE Arca Internet Index. Facebook (FB), Monster Worldwide (MWW) and WebMD (WBMD) posted notable losses.

Gold stocks also saw considerable weakness on the day, dragging the NYSE Arca Gold Bugs Index down by 3 percent. With the drop, the index set a two-month closing low.

Networking, airline, and housing stocks also came under significant selling pressure, reflecting the broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday despite the overnight weakness on Wall Street. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 1.1 percent, the French CAC 40 Index fell by 0.8 percent and the German DAX Index dipped by 0.4 percent.

In the bond market, treasuries showed a lack of direction throughout the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by less than a basis point to 2.636 percent.

Looking Ahead

While developments in Washington are likely to remain in focus on Wednesday, traders are also likely to keep an eye on the release of the minutes of the latest Federal Reserve meeting.

Trading could also be impacted by reaction to earnings news from Alcoa (AA), which is releasing its third quarter results after the close of today's trading.

Alcoa is no longer a Dow component, but the release of quarterly results from the aluminum giant is still likely to be seen by many as the unofficial start of earnings season.