The Clinton Herald, Clinton, Iowa

Business & Technology

September 21, 2013

Stocks drop as investors fret over budget fight

ASSOCIATED PRESS

NEW YORK — Washington’s budget fight jolted Wall Street on Friday, reminding it that the next few weeks could bring a lot of uncertainty.

Investors hate uncertainty, and stocks plunged in afternoon sell-off that wiped out all the gains from rally earlier this week, when the Federal Reserve kept its huge economic stimulus program intact.

Major indexes were mixed in morning trading, but turned lower around midday after the U.S. House of Representatives voted to defund President Barack Obama’s health care law.

The vote itself wasn’t a surprise, but it reminded investors that the Republican-led House and the Democratic-controlled Senate are poised for a showdown over federal spending.

The debt ceiling must be raised by Oct. 1 to avoid a government shutdown, and a potential default on payments, including debt, later in the month.

The Dow Jones industrial average dropped 185.46 points, or 1.2 percent, to close at 15,451.09 — 225 points below its all-time closing high reached Wednesday after the Fed’s announcement.

The Standard & Poor’s 500 index fell 12.43 points, or 0.7 percent, to 1,709.91. The Nasdaq composite fell 14.66 points, or 0.4 percent, to 3,774.73.

All 10 industry groups in the S&P 500 fell, led lower by telecom companies and utilities. The S&P also fell on Thursday, making this its first two-day decline in almost three weeks.

Until now, September defied the worriers. The stock market has bounced backed from an August swoon, despite a calendar loaded with potential rally killers.

Fears of a conflict with Syria have faded, and Wall Street cheered when Larry Summers withdrew his name as a candidate to replace Federal Reserve chairman Ben Bernanke.

Summers, a former Treasury secretary, was viewed as being more likely to rein in the Fed’s massive stimulus program, which has kept interest rates low and boosted corporate profits.

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