More Red For Stock Markets On Thursday

Ongoing Government Shutdown will likely continue to drag down stock markets

I predict another red day for the stock market on Thursday, due to the continued US Government shutdown and due to the fact that neither side has given in just yet.

Yesterday was a red day for US stock markets, with the S&P 500 (SPY) losing .07%, the DJIA (DIA) losing .39%, and the NASDAQ 100 (QQQ) losing .08%. Considering the gravity of the shutdown and the 800,000 unemployed Federal employees, I would like to think that the facts will continue to sink in on this issue, considering that just yesterday markets began to slip ever so slightly. The minor slip yesterday appears to be a slow realization that the fight in Washington is set to go on a little longer than expected, otherwise investors simply do not care.

Either way, investors will likely begin to care more as this crisis draws on due to the economic ramifications that will follow a prolonged shutdown, which is why I think US stock markets will sink lower on Thursday.

Internationally, European markets followed led the US trend with large drops; Asian markets however appear to be another mixed bag, with the Hang Seng Index rising nearly 1% into the green and the Nikkei Index sinking nearly 1% into the red. Apparently Chinese investors are happy with a new non-manufacturing report that was released.

From a technical standpoint, the S&P 500 (SPY) still has yet again to hit its 50 day moving average since it managed to crash through it a few days ago. The 50 day moving average will provide a tough barrier to break through, but I believe that the debt ceiling crisis and this looming shutdown could push the S&P 500 (SPY) to deeper lows.

Futures markets do not bode well for stock markets today either, as most US futures markets are deep into the red as of the time of this writing. We are also due for weekly unemployment claims, ISM manufacturing, and factory orders reports today, not that any of these reports really have the ability to steal the government shutdown’s thunder (or lack thereof because it is closed). Yesterday’s ADP Employment report showed growth in the job market for September, but this is October and 800,000 people are still out of work.

Lastly, our favorite: Bernie Madoff’s old apartment is now on sale for $17 million in New York City; the owner Al Kahn bought it for a cheap $8 million from the government after Madoff made off with millions and then got caught. Just another fun fact to share around lunchtime.

Bottom Line: I predict more stock market declines today on Thursday, considering that the US Government and Congress still have yet to sort things out and investors will not like it.

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