The major indices are in the red once again today, with stocks down as investors start to worry about the potential impacts of a government shutdown. A deadline to fund the government is looming on Sept. 30. Moreover, worries about high interest rates continue to weigh on U.S. stocks.
Stocks climbed slightly yesterday after falling for the previous three sessions.
Investors Fret About a Likely Government Shutdown
A government shutdown appears likely, as the Senate probably will not be able to pass a funding extension before the Sept. 30 deadline, and House Republicans are having trouble agreeing upon their own spending extension. Moreover, some hardline GOP House members are against passing any sort of extension, preferring to set out long-term spending plans for each part of the government instead.
Credit rating agency Moody’s recently reported that a closure of the government would undermine America’s credit rating and hurt its economy. The company added that a shutdown could result in a downgrade of America’s debt “at some point.”
During a government shutdown, some federal employees would not receive their salaries, and a number of Americans would stop getting government benefits, a situation that would weigh on the country’s economy to some extent while the closure is ongoing.
Those issues are likely helping drag stocks down this morning.
Going forward, investors should seek to determine the extent to which Moody’s warnings are materializing.
Worries About Interest Rates Continue to Push Stocks Down
With investors continuing to be nervous about rising interest rates, JPMorgan Chase CEO Jamie Dimon added to the anxiety, suggesting that the Fed could raise its benchmark rate to 7% in the midst of coming “stagflation.” Neel Kashkari, a Federal Open Market Committee (FOMC) member, indicated that the central bank would likely need to increase its benchmark rate a bit.
On the other hand, Austan Goolsbee, another, more dovish FOMC member, said, “We may be on the golden path,” indicating that he does not see the need for more hikes, Bloomberg TV reported this morning. He added, however, that the Fed is still dealing with many “risks.”
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
