Oct. 03 - Summary: Wall Street is dragged lower on fear budget battle will turn into debt limit war; U.S. services sector slows and hiring does too -ISM; Jobless claims creep higher; New Amazon product speculation. Conway G. Gittens reports.
Blue chips closed at a one-month low as the Washington shutdown drags on for day number three. There was some optimism about movement towards a resolution... but that was not enough to prevent a triple-digit loss for the Dow, a near one percent drop for the S&P 500, and the worst day for the Nasdaq since August. Fear, however, is turning to the nation's debt limit. Several high profile corporate leaders, government officials, and policymakers are warning lawmakers against letting the budget debate merge into a fight over raising the government's debt limit in Mid-October. Here's IMF Managing Director Christine Lagarde: SOUNDBITE: CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "The ongoing political uncertainty over the budget, over the debt ceiling, does not help. The government shutdown is bad enough but failure to raise the debt ceiling would be far worse and could very seriously damage not only the U.S. economy but also the entire global economy." And there are more than just hypotheticals to worry about. Growth in the services sector slowed in September from an eight-month high the month before. Of particular concern, the services sector took on the fewest number of new employees in four months, according to the Institute for Supply Management. But other signs were less gloomy. Planned layoffs in September dropped 20 percent, according to Challenger, Gray & Christmas. Meanwhile, weekly jobless claims were up but remain at pre-recession levels. Much speculation about new Amazon products in the works. The maker of the Kindle is reportedly working on two smartphones -including a high-end model with a 3D-like function, according to Tech Crunch. The company is also working on a streaming TV box to hit the market in time for the holidays, reports the Wall Street Journal. Amazon's entry into both markets could pose a problem for others. The Internet retailer typically sells devices at a low cost in hopes of increasing sales of other products on Amazon.com. European investors largely overlooked positive economic data in their region - worried more about chances of a U.S. default.