Government Woes, Wal-Mart Sink Stocks Again

Government Woes, Wal-Mart Sink Stocks Again

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average can't catch break. After trading near breakeven for most of today's session, stocks dipped again in the afternoon, finishing in the red for the fifth day in a row on concerns about the government shutdown and rumors about a cut in Wal-Mart orders. The blue chips closed down 61 points, or 0.4%, having fallen every day since the Fed announced it would keep current levels of stimulus last Wednesday.

Following a 21-hour filibuster-like speech by Sen. Ted Cruz (R-Texas), the Senate finally moved to take up the House bill that would keep the government open but defund Obamacare. With an October 1 deadline looming, the Senate will take a final vote on Sunday, and, if they have the 60 votes they need for cloture, it will send the bill back to the house with Obamacare language removed. The House would then be forced to pass the bill with Obamacare funding or shut the government down.

Meanwhile, Treasury Secretary Jack Lew said the country would hit the debt ceiling on October 17 without a decision by Congress to raise the limit. The debt ceiling crisis promises that another bruising round of political debate is right around the corner, and if the funding debate is any lesson, I'd expect stocks to continue to be pressured. Secretary Lew sent a letter to House Speaker John Boehner (R-Ohio) urging him to get a clean bill passed to raise the borrowing limit.

On the big board today, Wal-Mart shares were momentarily jolted by a Bloomberg report that said it was cutting orders. Shares quickly dove more than 1% but recovered after company sources said the statements were misleading, explaining that Wal-Mart is constantly managing its inventory. Nonetheless, the world's largest retailer finished down 1.5%, and the markets seemed to buy into the report as the Dow did not recover afterward. The broad market is particularly responsive to Wal-Mart as it's responsible for nearly 10% of all non-automotive consumer spending in the country.

Elsewhere, JPMorgan Chase rebounded after two straight down days, gaining 2.7% today. In the sometimes upside-down world of Wall Street, shares were moving in spite of bad news. The too-big-to-fail bank was reportedly in talks to settle a slew of federal and state allegations for $11 billion, much more than the $3 billion the bank had offered yesterday. The matter has not yet been resolved, but investors simply may be anxious to see the bank end its legal woes no matter the cost. While $11 billion would certainly put a dent in earnings, shares of the bank are cheap at a P/E under 9.

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