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Equities ETFs Nosedive on Potential US Debt Fight

By  +Follow October 3, 2013 6:11AM
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Equities ETFs plunged alongside the markets on Thursday morning as dire predictions about the consequences of another fight over the debt ceiling, paired with the continued government shutdown, led to a major sell-off. This took major ETFs that track equities with them, with the SPDR S&P 500 ($SPY) falling as much as 1.3 percent by noon. However, news that John Boehner has reportedly told Republican members of congress that he’ll be willing to forego the “Hastert Rule” (the informal agreement that no bill will be brought to the floor of the house without a majority of Republican votes) to avoid a default sparked an early afternoon rally that took losses back down to just over 0.75 percent.

Treasury: Default on National Debt Could Cause Stock Market Crash, Recession

The Treasury Department has been making a string of warnings to congress in hopes of preventing another difficult battle over the debt ceiling. The last extended fight ultimately resulted in a downgrade of American debt and a major decline in the equities market. Today, the department released a report highlighting what it viewed as a potential “catastrophe.”

“Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation,” the report said.

“In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth -- with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression.”

Treasury Secretary Jack Lew joined the chorus, urging congress not to delay action.

‘‘As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,’’ Lew said in a statement. ‘‘Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need — a self-inflicted wound harming families and businesses.’’

Equities ETFs, Return on US Debt Fall

In a classic example of skewed market logic, the concern over the potential for the United States defaulting on government debt had investors scrambling to buy more government debt. While stocks slid, investors looking to reduce risk have been buying bonds, with the yield on 10-year T-notes falling 3 basis points to 2.6 percent yesterday.

Other ETFs tracking the equities market were on the move with a high trading volume. The iShares Russell 2000 Index ($IWM) was off almost 1.25 percent, the Select Sector Financial Slct Str SPDR ($XLF) lost about 0.75 percent, and the Direxion Daily Small Cap Bear 3X Shares ($TZA) was up over 3 percent. Also making big moves were ETFs tracking volatility in the stock market, with the iPath S&P 500 VIX Short Term Futures (VXX) gaining almost 2.5 percent and the VelocityShares Daily Inverse VIX Short Term ETN (XIV) shedding just over 2.5 percent.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for SPY
TheStreetOptions
27 Dec 14 07:01:58
Understanding Growth Investing - $spy http://t.co/H2YUzBsyKw
Alvaro Kirkland
27 Dec 14 07:00:10
RT @lancejepsen: GuerillaStockTrading News $SPY $IWM $QQQ http://t.co/8svz07FgkY
Shaun
27 Dec 14 06:57:11
@ghoshworld @YAN0 @qz guys awesome article. Did you assume buying at the close the day before or at the open the day of the move? $SPY $SPX
budfoxhub
27 Dec 14 06:41:32
$SPY Technical Analysis ($SPY): $SPY Daily Chart: http://t.co/0LBmjRpYQL
John Calhoun
27 Dec 14 06:41:20
RT @JLyonsFundMgmt: 5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/HtoxMOCwKv http://t.co/3cYOcs0jIK
Logan Mohtashami
27 Dec 14 06:38:47
RT @JLyonsFundMgmt: Chart Of The Week (by views): 1-Month Low To 1-Year High In 4 Days $SPY Post: http://t.co/NmCuZgYGm5 http://t.co/lI3Vom…
Logan Mohtashami
27 Dec 14 06:38:42
RT @JLyonsFundMgmt: Runner-Up ChOTW: 2014 Most SKEW'ed Year On Record For Stocks $SPY Post: http://t.co/731PPjBMmL http://t.co/Py91BiIWKU
Gail MarksJarvis
27 Dec 14 06:38:38
No bull: 2015 stock market expected to grow — just not as much http://t.co/teTCCbFK05 $SPY
Logan Mohtashami
27 Dec 14 06:38:37
RT @JLyonsFundMgmt: 5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/HtoxMOCwKv http://t.co/3cYOcs0jIK
Briefing.com
27 Dec 14 06:34:13
Recap of the week's #market activity, #earnings, key events scheduled for next week http://t.co/ppVVqyNpKw #stocks $DJIA $SPY $QQQ #economy
Dan G.
27 Dec 14 06:29:26
RT @JLyonsFundMgmt: 5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/HtoxMOCwKv http://t.co/3cYOcs0jIK
Dawn Rinaldi
27 Dec 14 06:29:18
$STUDY $IWM $SPY surprised me last January but makes sense in hindsight. Also reason for continued meltup now. No reason to sell wins now
Dawn Rinaldi
27 Dec 14 06:27:10
$STUDY $IWM $SPY recall 2013 after allocations big winners 2012 started selling as tax calendar reset. Losses harvested prior year.
RealMarketAlerts
27 Dec 14 06:26:12
5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/S92QGB6YBK http://t.co/tHe98Pgnqh
Phil Pearlman
27 Dec 14 06:25:58
RT @JLyonsFundMgmt: Chart Of The Week (by views): 1-Month Low To 1-Year High In 4 Days $SPY Post: http://t.co/NmCuZgYGm5 http://t.co/lI3Vom…
Danny
27 Dec 14 06:25:17
Out of ordinary... Out of this world by @JLyonsFundMgmt: 5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/v70g0DhxgC
Danny
27 Dec 14 06:23:52
RT @JLyonsFundMgmt: 5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/HtoxMOCwKv http://t.co/3cYOcs0jIK
Dana Lyons
27 Dec 14 06:23:12
5% 3-Day S&P 500 Rallies To New Highs $SPY $SPX Post: http://t.co/HtoxMOCwKv http://t.co/3cYOcs0jIK
Dana Lyons
27 Dec 14 06:21:37
Runner-Up ChOTW: 2014 Most SKEW'ed Year On Record For Stocks $SPY Post: http://t.co/731PPjBMmL http://t.co/Py91BiIWKU
Alessandro
27 Dec 14 06:20:52
Low Risk #ETFs Beating $SPY In 2014 - ETF News And Commentary | Seeking Alpha - http://t.co/jbDNwkZyWi
Dana Lyons
27 Dec 14 06:19:15
Chart Of The Week (by views): 1-Month Low To 1-Year High In 4 Days $SPY Post: http://t.co/NmCuZgYGm5 http://t.co/lI3VomOlyY
Dan Neagoy
27 Dec 14 06:16:27
Weekend Market Commentary 12/26/2014 $TLO, $SCHH, $SPY, $IYR http://t.co/uazVKc3Saa via @thetatrend
G. Thomas Lackey Jr
27 Dec 14 06:06:07
Commented on StockTwits: still bullish, these charts are leaning higher for now $IWM $SPY $QQQ http://t.co/XR3uS0GDVM
Greg Harmon, CMT
27 Dec 14 06:05:36
$SPY Trends and Influencers December 27, 2014 - Dragonfly Capital http://t.co/z8TSUtmbkd $GLD $USO $TLT $VXX $UUP $EEM $IWM $QQQ $PEK $ASHR
SS
27 Dec 14 06:04:45
so about that fear.. $SPY $IWM etc etc.. http://t.co/T1NQSh3Aim
Family Investor
27 Dec 14 06:02:56
RT @GerringCapital: Fires Still Burning In The Oil Patch http://t.co/xUz9cPpmXJ via @GerringCapital #stocks #investing #markets $SPY $XLE $…
Family Investor
27 Dec 14 06:02:21
RT @PTTResearch: "Five Hedge Ideas To Protect Your Portfolio" http://t.co/zVxiK5titZ by @poisedtotriple $SPY $HDGE $EEM $UUP $FXI http://t.…
TheStreetOptions
27 Dec 14 06:01:57
Employee stock options - $spy http://t.co/bXQP5Vbhf8
FXY_Fractalerts
27 Dec 14 06:00:37
What is the $SPY going to do next? Get real time alerts and analysis at http://t.co/nbyzPXoVvF
Mark Gomes
27 Dec 14 06:00:21
"Five Hedge Ideas To Protect Your Portfolio" http://t.co/2krf62QlCd by @poisedtotriple $SPY $HDGE $EEM $UUP $FXI http://t.co/VymHSq37AI
PTT Research
27 Dec 14 06:00:21
"Five Hedge Ideas To Protect Your Portfolio" http://t.co/zVxiK5titZ by @poisedtotriple $SPY $HDGE $EEM $UUP $FXI http://t.co/tPUhZEqp2A
G. Thomas Lackey Jr
27 Dec 14 05:54:06
Now that Small caps are leading again, can we take a break from the Top calling at least until the Mid January lull? ;) $IWM $SPY
Dan G.
27 Dec 14 05:45:17
$spx set to close 2014 on record highs like 2013: Last time that happened?1998,1999.If 2015 is avg (+9-10%), $spx 2270-2300.Open-minded $spy
Leopoldo Schafer
27 Dec 14 05:31:39
RT @lancejepsen: GuerillaStockTrading News $SPY $IWM $QQQ http://t.co/CAIaJtvyWn
Jack Prescott
27 Dec 14 05:31:34
RT @lancejepsen: Korn Ferry International Stock Price Breaks 200 Day MA $KFY $SPY $IWM http://t.co/OdFlBgDQBn http://t.co/KxJubKrcbx
PropThinker
27 Dec 14 05:31:09
Boy were we wrong...at least in the short-term. One and One from Last Week’s Recap - http://t.co/x42Lce4r2j $GILD $ACHN $ABBV $IBB $SPY
TalkMarkets
27 Dec 14 05:25:03
4 Outperforming Country ETFs Of 2014 $SPY $SMIN $CHNA $EPHE $EIDO $VEU $ACWI http://t.co/wtpxuT8mH9
Stan
27 Dec 14 05:13:29
RT @sanglucci: Happy Holidays - AM Watchlist 12.26.14 http://t.co/eXMK45h6m0 $SPY $AMZN $NFLX $LNKD $BAC $C http://t.co/uHHfgIvNfo
Scott Redler
27 Dec 14 05:05:06
Nice job gregg."@harmongreg: What to expect from the stock market this week - Dragonfly Capital $SPY … http://t.co/jvRVNCykua”
Eric
27 Dec 14 05:01:56
RT @sanglucci: $AMZN $BIDU $AAPL longs all paid well just had to sit in em for a while and have the conviction. I thought $SPY was gonna lo…
Greg Harmon, CMT
27 Dec 14 05:01:45
What to expect from the stock market this week - Dragonfly Capital $SPY … http://t.co/AAv4XX3y1x
Boom Boom Room
27 Dec 14 04:57:33
RT @harmongreg: You Suck at Investing - But We All Do - Dragonfly Capital http://t.co/kEb50TgUfQ $SPY
NoanetTrader
27 Dec 14 04:56:28
"@jessefelder: Who's buying $SPY here? My best guess is the dumbest of dumb money: http://t.co/9M8P3KAgHK $HYG $BKLN"
NoanetTrader
27 Dec 14 04:53:31
"@howardlindzon: 2014 has been the best year in human history to be alive. Odds are that 2015 will be better http://t.co/6k49rlHx7P $SPY"
NoanetTrader
27 Dec 14 04:51:26
"@howardlindzon: Top 10 stories from @TheEconomist in 2014: http://t.co/QUOz5FtJgU $SPY $TLT"
Brian Parrish
27 Dec 14 04:51:04
RT @harmongreg: You Suck at Investing - But We All Do - Dragonfly Capital http://t.co/kEb50TgUfQ $SPY
Options Trader
27 Dec 14 04:47:37
China's trade growth seen falling short of target in 2014: SHANGHAI (Reuters) - China's trade w... http://t.co/Ij40Ob3AGd $SPY $QQQ $IWM
Inside Stock Alerts
27 Dec 14 04:47:37
China's trade growth seen falling short of target in 2014: SHANGHAI (Reuters) - China's trade w... http://t.co/Vdrob96XPW $SPY $QQQ $IWM
Eric Parnell, CFA
27 Dec 14 04:43:20
Fires Still Burning In The Oil Patch http://t.co/xUz9cPpmXJ via @GerringCapital #stocks #investing #markets $SPY $XLE $XOM $EOG $LINE
moderneconomist.com
27 Dec 14 04:38:22
RT @harmongreg: You Suck at Investing - But We All Do - Dragonfly Capital http://t.co/kEb50TgUfQ $SPY
				
				
By  +Follow October 3, 2013 6:11AM
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