Stocks pare losses on White House invite

SAN FRANCISCO (MarketWatch) — U.S. stocks pared losses Wednesday after a tiny thaw in negotiations over the government shutdown countered a weaker-than-expected report on private-sector jobs and growing concerns over how long the shutdown might take.

The S&P 500 index (SPX) , which was down nearly 15 points earlier, declined 5.86 points, or 0.3%, to 1,689.14, with consumer staples, health care, and industrials the worst performing sectors.

The Dow Jones Industrial Average (DJIA) , which at one point was off by 147 points intraday, dropped 83.03 points, or 0.6%, to 15,108.67, with shares of United Technologies Corp. (UTX) , Coca-Cola Co. (KO) and American Express Co. (AXP)  weighing on the index.

The Nasdaq Composite (COMP) fell 10.62 points, or 0.3%, to 3,807.36, after touching an intraday low of 3,788.45.

As the government shutdown dragged into its second day, President Barack Obama invited congressional leaders to the White House to discuss the halt in nonessential services and the looming debt-ceiling crisis.

Declining stocks outnumbered advancers by nearly two to one on the New York Stock Exchange and the Nasdaq. By 12:30 p.m. Eastern time, composite volume topped 1.5 billion shares for NYSE-listed stocks and 862 million shares for Nasdaq-listed stocks.

Investors are "having a little rethink over the implications and longevity of the U.S. government shutdown," said Andrew Wilkinson, chief economic strategist at Miller Tabak, in emailed comments on Wednesday.

Reuters Enlarge Image President Barack Obama.

Some strategists now say there's a clear chance the shutdown could blend together with the debt-limit debate, prolonging the shutdown to mid-October. They've also noted a longer shutdown would create more of a drag on the economy and might call into question Washington's ability to reach a debt-ceiling deal. The debt-ceiling issue is widely seen as more important.

• Markets Stream: Follow continuous coverage of the markets /conga/story/misc/markets_stream.html 267565

"I think it's impossible to handicap how long this is going to take," said Mark Luschini, chief investment strategist at Janney Montgomery Scott, about the shutdown, which he estimates will drag on GDP by 0.1% a week. "In the meantime, the market's going to be under pressure but we're not at a violent selloff yet."

A huge selloff would be triggered if gridlock in Washington extends past Oct. 17, when the Treasury will have to start "robbing Peter to pay Paul" to meet obligations and some $30 billion in interest payments in November become threatened, Luschini said.

Investors over the past few years have become somewhat less sensitive to drama in Washington, according to Jim Kee, president and chief economist at South Texas Money Management, which has $1.9 billion in assets under management. But he also said that there will be a stronger market reaction if the current shutdown last longer than others, noting the median length for a shutdown is three days.

"If we're still talking about the shutdown in a week or two, that will create a lot of volatility and downward pressure in markets," Kee said. Earlier in the day, one ex-Treasury official said the downside risks even include the U.S. economy falling back into recession.

On the jobs front, private-sector employment gains slightly picked up in September as employers added 166,000 jobs, said a monthly report on Wednesday from payrolls expert Automatic Data Processing Inc. But economists polled by MarketWatch had expected a September gain of 180,000. ADP also revised down August's gain to 159,000 from 176,000.

Markets blog:
The Tell
Markets news and analysis.
Follow @thetellblog
/conga/story/misc/the_tell.html 281317

10 Best Blue Chip Stocks To Own Right Now

"The job market appears to have softened in recent months," said Mark Zandi, chief economist of Moody's Analytics, which prepares ADP's report, in a statement. "Fiscal austerity has begun to take a toll on job creation."

U.S. stock futures already had been in negative territory before the ADP report, but they retreated further after its release. The ADP report is taking on greater significance this week, because the government's monthly jobs report might not come out if the shutdown continues.

On Wednesday, investors also are watching for speeches from senior Federal Reserve officials, including Fed chief Ben Bernanke.

In overseas trading, European stocks traded broadly lower after the European Central Bank left key interest rates unchanged as expected. ECB President Mario Draghi said in a news conference after the decision that risks to the growth outlook remain skewed to the downside, adding that the bank is "attentive" to developments in foreign exchange.

In Italy, Silvio Berlusconi said he would back the government of Prime Minister Enrico Letta in a confidence vote on Wednesday, a surprise move that has allowed the coalition government to avoid a collapse.

Asia markets closed mostly higher, while gold rose, the dollar fell and the U.S. oil benchmark dipped.