The major global indices all fell Monday on the threat of a U.S. government shutdown.
In the U.S., the Dow Jones Industrial Average declined 0.8 percent to 15,129.67, while the S&P Retailing Industry Group fell 0.4 percent to 847.24.
Guy LeBas, chief fixed income strategist at Janney Capital Markets, expects the “imminent government shutdown to be brief, though a longer one carries economic risks, as does the impending debt ceiling debate.”
He noted that the shutdown, if it were to occur, would be the 18th such event since 1976 and the first since 1996 when there was the 21-day standoff during the Clinton administration. Should it last more than several days, he estimated that as many a 1 million nonessential employees will be furloughed. The federal government won’t bump up against the debt ceiling until mid-October.
Most U.S. retail stocks were down, with Stage Stores Inc. losing 5.5 percent to $19.20. Beleaguered retailer J.C. Penney Co. Inc. fell 2.7 percent to $8.81, closing at its lowest level since 2000, although it did hit an intraday low of $8.59 that rivaled its June 1982 level.
Rick Snyder, senior retail analyst at Maxim Group, on Monday downgraded Penney’s shares to “hold” from “buy,” noting that “[w]e see nothing that would indicate that the overall environment should improve going forward.”
The day started with the overseas markets in Asia ending their trading sessions with declines. The Nikkei 225 in Tokyo fell 2.1 percent to 14,455.80, while the Hang Seng Index in Hong Kong was down 1.5 percent to 22,859.86.
The European stock markets continued the pattern, losing ground both on concerns of the threat of a federal government shutdown and political troubles in Italy. The FTSE MIB in Milan dropped 1.2 percent to 17,434.86 as Prime Minister Enrico Letta said he’ll request a confidence vote for Oct. 2 to try to save his five-month-old administration, after Silvio Berlusconi withdrew his support from the ruling coalition and pulled his ministers from cabinet.
The FTSE 100 in London and the DAX in Frankfurt both lost 0.8 percent to 6,462.22 and 8,594.40 respectively, while the CAC 40 in Paris dropped 1 percent to 4,143.44.
Retail and luxury stocks were mostly down, with the day’s biggest fallers including Safilo, down 1.4 percent to 14.54 euros; Compagnie Financière Richemont, 1.2 percent to 90.60 Swiss francs; Yoox.com, 1.8 percent to 25.34 euros; and Asos.com, 1.1 percent to 51.17 pounds.
Unilever’s stock dropped 0.1 percent to 28.76 euros, after it said in an unscheduled trading statement on Monday that sales in the third quarter are slowing down. The company said it has seen “weakening” in the market growth of many emerging countries in the quarter, and expects underlying sales growth of 3 percent to 3.5 percent.