Government Shutdown Worries Lead To Weakness On Wall Street - U.S. Commentary

(RTTNews) - After snapping a five-session losing streak in the previous session, stocks moved back to the downside during trading on Friday. Lingering concerns about the possibility of a government shutdown contributed to the pullback by the markets.

The major averages all ended the day in the red but well off their worst levels of the day. The Dow fell by 70.06 points or 0.5 percent to 15,258.24, the Nasdaq dipped 5.83 points or 0.2 percent to 3,781.59 and the S&P 500 slid 6.92 points or 0.4 percent to 1,691.75.

Despite the weakness seen for much of the week, the major averages turned in a mixed performance. The Nasdaq edged up by 0.2 percent, while the Dow and the S&P 500 fell by 1.2 percent and 1.1 percent, respectively.

The weakness on Wall Street came amid continued concerns about developments in Washington, where lawmakers continue to wrangle over a bill to keep the government running.

In the Senate, lawmakers voted 54 to 44 to approve a temporary spending bill, with the vote coming down strictly along party lines.

The Senate version of the bill extends government spending through November 15th rather than December 15th and strips language from a House-passed bill that defunded Obamacare.

With the vote in the Senate, the House Republican leadership will have to decide whether to bring the Senate bill up for a vote or risk a government shutdown.

The House is scheduled to be in session over the weekend, but House Speaker John Boehner, R-Ohio, has previously suggested that he will not accept a "clean" spending bill from the Senate.

If a new continuing resolution is not approved by both houses of Congress and signed by President Obama, government funding is currently slated to run out on Monday.

On the economic front, the Commerce Department released a report showing that U.S. personal income and spending both rose in line with estimates in August.

The report said personal income rose by 0.4 percent in August following an upwardly revised 0.2 percent increase in July. The acceleration in the pace of growth matched expectations.

Additionally, the Commerce Department said personal spending increased by 0.3 percent in August after rising by an upwardly revised 0.2 percent in the previous month. The spending growth also came in line with estimates.

A separate report from Thomson Reuters and the University of Michigan showed an upward revision to their reading on U.S. consumer sentiment in the month of September, although the index still pointed to a deterioration in sentiment compared the previous month.

Sector News

Steel stocks showed a significant move to the downside on the day, resulting in a 1.9 percent drop by the NYSE Arca Steel Index. The index pulled back further off the seven-month closing high it set last week.

Cliffs Natural Resources (CLF) and U.S. Steel (X) turned two of the steel sector's worst performances, falling by 3.8 percent and 3.1 percent, respectively.

Notable weakness was also visible among airline stocks, as reflected by the 1.9 percent loss posted by the NYSE Airline Index. With the loss, the index gave back ground after ending the previous session at its best closing level in well over six years.

Telecom, housing, and biotechnology stocks also came under pressure on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday. Hong Kong's Hang Seng Index and Australia's All Ordinaries Index rose by 0.4 percent and 0.3 percent, respectively. However, Japan's Nikkei 225 Index bucked the uptrend and fell by 0.3 percent.

Meanwhile, the U.K.'s FTSE 100 Index ended the day down by 0.8 percent, while the French CAC 40 Index and the German DAX Index both closed roughly flat.

In the bond market, treasuries moved back to the upside amid the worries about a potential government shutdown. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.4 basis points to 2.619 percent.

Looking Ahead

Next week's trading is likely to be driven by the weekend's events in Washington and whether lawmakers are able to avert a government shutdown.

Regardless of what happens on Capitol Hill, however, traders are likely to keep a close eye on the Labor Department's monthly jobs report on Friday.

Reports on national manufacturing and service sector activity, construction spending and factory orders may also attract some attention.