(Photo: Richard Drew, AP)
Stocks were lower in afternoon trading Tuesday -- with the Nasdaq taking a pounding -- as the political standoff in Washington continued and the partial government shutdown stretched into its eighth day.
The Dow Jones industrial average was down about 125 points, or 0.8% and the Standard & Poor's 500 was off 1%. The Nasdaq composite was taking a 1.9% hit.
On Monday, the Dow fell 136.34 points, or 0.9%, to 14,936.24 and the S&P 500 slumped 14.38 points, or 0.9%, to 1,676.12. The Nasdaq dropped 37.38 points, or 1%, to 3,770.38.
Anxiety over an Oct. 17 deadline to raise the nation's debt ceiling is starting to eat away at investor sentiment as compromise in Washington remains absent, says Pat Adams, a portfolio manager at Choice Investment Management.
While Adams says a default is avoidable, as the U.S. could maneuver its finances enough to pay off coming interest payments owed on government bonds without a Congressional deal, investors are still seeking some protection, he says.
"Markets tend to always seek protection until a concern is eliminated," Adams told clients in a research note, adding that the market, already down 3% from its Sept. 18 high, could tumble a total of 5% to 7% from that recent peak "if a debt ceiling deal is not close to being done by the 16th of October." He warns that stocks could fall even more if the Oct. 17 deadline passes without a deal.
Still the damage to stocks through the first seven days of the shutdown has been limited, as hopes for some agreement that would head off the nation's first-ever default remained high despite the standoff in the nation's capital. Heading into today's trading session, the Dow was off 1.3% since the shutdown began, the S&P 500 was 0.3% lower and the Nasdaq was basically flat.
Aside from the theatrics in Washington, investors will also be paying close attention today to the unofficial start of the third-quarter earnings season. After the closing bell, aluminum maker Alcoa and fast-foot chain Yum Brands will report. Analysts are expecting companies in the S&P 500 to grow their earnings 4.3% vs. the same quarter a year ago.
In Asia on Tuesday, Japan's Nikkei index inched up by 0.3% to 13,894.61, while Hong Kong's Hang Seng index was up 0.9% to 23,178.85. China's Shanghai composite was up 1.1% to 2,198.20.
Benchmarks across Europe extended recent losses. Britain's FTSE 100 index fell 1.1% to 6,365.83 while Germany's DAX index lost 0.4% to 8,555.89. France's CAC 40 index dropped 0.8% to 4,133.53.
Benchmark crude oil for November delivery rose 50 cents to $103.53 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 81 cents to close at $103.03 a barrel on the Nymex on Monday.
In government bond trading, the yield on the 10-year Treasury note rose to 2.64% from 2.63% Monday.
Contributing: Associated Press