Stocks Climb Well Off Lows But Still Close In The Red - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Wednesday, stocks climbed well off their worst levels of the day but still ended the session in the red. The ongoing government shutdown contributed to the lower close along with disappointing jobs data.

The major averages moved to the upside going into the close but still posted modest losses on the day. The Dow fell 58.56 points or 0.4 percent to 15,133.14, while the Nasdaq edged down 2.96 points or 0.1 percent to 3,815.02 and the S&P 500 slipped 1.13 points or 0.1 percent to 1,693.87.

The modest weakness seen at the close of trading on Wall Street reflected growing concerns about the economic impact of a prolonged government shutdown, as lawmakers in Washington remain at an impasse over a temporary spending bill.

With Republicans and Democrats thus far showing little willingness to compromise, traders are becoming less optimistic that the shutdown will be short-lived.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "What's becoming more clear is that D.C. will take this impasse right up to the October 17th debt ceiling deadline, leaving markets twisting in the wind but still under the assumption that some deal will be struck."

A report from payroll processor ADP showing weaker than expected private sector job growth in the month of September also generated some selling pressure.

ADP said the private sector added 166,000 jobs in September compared to a downwardly revised increase of 159,000 jobs in August.

Economists had expected private sector employment to increase by about 180,000 jobs compared to the addition of 176,000 jobs originally reported for the previous month.

With the government shutdown likely delaying the release of the Labor Department's monthly jobs report, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "This means the ADP report might be our best guide to actual job growth in the month,

"Its track record is far from perfect, but the picture it paints is one of still-lackluster job creation," he added. "Business sentiment weakened ahead of the government shutdown, and a prolonged closure or payments default later this month would only sour the mood further."

Sector News

While most of the major sectors ended the session off their worst levels, considerable weakness remained visible among brokerage stocks. The NYSE Arca Broker/Dealer Index fell by 1 percent to its lowest closing level in almost a month.

Investment Technology Group (ITG), Raymond James (RJF) and FXCM Inc. (FXCM) turned in some of the brokerage sector's worst performances.

Airline stocks also came under pressure on the day, dragging the NYSE Arca Airline Index down by 1 percent. Republic Airways (RJET) posted a particularly steep loss after helping to lead the sector higher on Tuesday.

Concerns about the impact of the government shutdown also weighed on defense stocks, while some strength emerged among electronic storage, steel, and healthcare provider stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday. Hong Kong's Hang Seng Index rose by 0.6 percent, while Australia's All Ordinaries Index edged up by 0.2 percent. However, Japan's Nikkei 225 Index bucked the uptrend and plunged by 2.2 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index slid by 0.4 percent, the German DAX Index and the French CAC 40 Index dropped by 0.7 percent and 0.9 percent, respectively.

In the bond market, treasuries ended the day modestly higher, partly offsetting the weakness that was seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2 basis points to 2.626 percent.

Looking Ahead

Trading on Thursday may be impacted by the Institute for Supply Management's report on service sector activity, although the release of separate government reports on weekly jobless claims and factory orders has been postponed by the shutdown.