New York Report: Default worry preoccupies US markets

US stocks fell in a volatile session yesterday as the impasse over the debt ceiling in Washington continued with very little sign of progress towards a resolution.

Despite some key corporate earnings, traders held off on making big bets given the political uncertainty. Selling accelerated during the afternoon after Senator Richard Durbin said Senate negotiations had been suspended until House Speaker John Boehner can work out a fiscal plan that can proceed in the House of Representatives.

Losses were broad, with all 10 S&P 500 sectors falling on the day. Three-quarters of stocks traded on the New York Stock Exchange ended lower while 68 per cent of Nasdaq-listed shares fell.

Markets have largely avoided steep losses on optimism that lawmakers would agree to end the partial government shutdown and raise the debt ceiling. At the same time, volatility has spiked as the deadline approaches with little obvious progress seen. The CBOE Volatility index jumped 16 per cent and is up more than 40 per cent over the past four weeks.

The Dow Jones industrial average was down 133.25 points, or 0.87 per cent, at 15,168.01. The Standard & Poor’s 500 Index was down 12.08 points, or 0.71 per cent, at 1,698.06. The Nasdaq Composite Index was down 21.26 points, or 0.56 per cent, at 3,794.01.
Despite the day’s decline, the S&P remains above its key moving averages, which have been serving as support.

The index is currently about 0.6 per cent above its 14-day moving average.