Dow Slides as Government Contractors Warn of Furloughs
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.
As the government shutdown dragged into its second day, Wall Street edged lower with the Dow Jones Industrial Average finishing down 59 points, or 0.4%. The broad-based S&P 500 and the tech-heavy Nasdaq both slipped less than 0.1%. With nearly 1 million federal workers furloughed and national parks and monuments shut, President Obama met with congressional leaders this afternoon, but was unable to broker an agreement between the two parties who are at odds over the future of Obamacare. House Republicans have refused to fund the government without stipulations that undermine the new health-care law. The president also met with heads of the nation's largest banks to draft their help in urging Congress to reopen the government and raise the debt ceiling. Ironically, one of the best ways to hasten lawmakers into action may be a sharp sell-off in stocks.
Elsewhere, the ADP's employment report did no favors to reassure rattled investors as the payroll processor reported that 166,000 jobs were added last month, slightly behind expectations at 170,000. ADP also revised its August tally down from 176,000 to 159,000. Numbers in that range are not enough to make significant improvements in the unemployment. ADP's survey also gains importance as there will be no official jobs report from the Labor Dept. if the shutdown continues through Friday.
Of all industries, the shutdown is likely to be hardest on the defense sector, which depends on the government as its biggest customer. United Technologies fell 2.2% today and was the Dow's worst performer as the conglomerate, which derives nearly 20% of its revenue from the government, said it may furlough as many as 5,000 workers. Temporary layoffs would begin with its Sikorsky division in charge of Black Hawk helicopters and continue to other government-connected segments if the shutdown lasts into next month. United Technologies has already slowed Black Hawk to a virtual standstill as production relies on federal inspectors, and it was one of many manufacturers, including fellow Dow heavyweight Boeing to warn of slowdowns and furloughs today. Boeing shares were down as much as 1.5% during the session, but finished up slightly after Buckingham lifted its price target.
, meanwhile, was the biggest gainer on the Dow, rising 1% as an investor group was reportedly advocating founder Bill Gates' ouster from the company's chairmanship. The activism seems a bit odd, but shareholders, who had cheered CEO Steve Ballmer's announcement of his departure, are perhaps still hungry for new blood, especially as the software maker's all-important CEO search continues.
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The article Dow Slides as Government Contractors Warn of Furloughs originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Automatic Data Processing and owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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