NEW YORK – Wall Street to Washington: End the shutdown and move on.
The U.S. stock market ended lower Wednesday as traders, Europe’s central banker and Wall Street CEOs urged Congress to stop the two-day government shutdown that has closed national parks, put hundreds of thousands of federal employees on furlough and forced President Obama to cancel an overseas trip.
Wall Street made it clear that the longer the budget fight drags on, the more its bankers worry about significant damage to the economy and the possibility that Congress won’t allow the government to borrow more. The financial market sees that as a disastrous move that could send the U.S. into recession.
“I’m not going out there and beating my chest and saying the world is coming to an end here,” said Brad McMillan, the Chief Investment Officer at Commonwealth Financial, an investment adviser. “But we face the possibility for significantly greater disruptions than the market is currently pricing in.”
On Wednesday, the major indexes opened sharply lower, with U.S. lawmakers appearing unwilling to yield in their entrenched positions. After Obama summoned Congressional leaders to the White House later in the morning, the market started to recoup some of its losses, but the recovery faded throughout the afternoon.
“The markets are sending a loud message to Washington lawmakers to get their act together and resolve the budget crisis,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
Treasury Secretary Jacob Lew told Congress that unless lawmakers act in time, he will run out of money to pay the nation’s bills by Oct. 17. Congress must periodically raise the limit on government borrowing to keep U.S. funds flowing, a once-routine matter that has become locked in battles over the federal budget deficit.
The last time there was an impasse over the borrowing limit, in August 2011, it led to a downgrade of the United States’ credit rating by Standard & Poor’s and a plunge in the stock market.
The Dow Jones industrial average fell as much as 147 points in the first hour of trading. It ended the day down 58.56 points, or 0.4 percent, at 15,133.14 points. The Standard & Poor’s 500 index fell 1.13 points, or 0.1 percent, to 1,693.87. The Nasdaq composite declined 2.96 points, or 0.1 percent, to 3,815.02.
Six of 10 industry sectors in the S&P 500 fell. Declines were led by the makers of consumer staples and industrial companies. Defense companies, which rely on government contracts for a large part of their revenue, led declines.