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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
Mark Hodge
2 Sep 14 15:57:34
If you've never traded them before...5 Reasons To Consider Trading Binary Options http://t.co/75T9DBtIFD $ES_F $SPX $SPY via @CoachHodge
OZ_Options
2 Sep 14 15:56:46
Out of $aapl calls for now. Faded today. Still long $gild and long a small position on $spy 200 weeklies.
Top ETF Funds
2 Sep 14 15:55:14
2 Things That Can Sink the Bull Market.. http://t.co/2Y5xOlnJGU $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:54:57
Take a Chance on S&P 500, Since Weak Volume Can Still Work.. http://t.co/pwp9iWAAUB $SPY #ETF #ETFs #Stocks
Day Traders Group
2 Sep 14 15:54:44
MACD Bullish Crossovers http://t.co/quMVtJcVq2 $MDCA $SPY $NNA $NTI $TWTR $INO $AA $AAPL $GOOGL $MU $HOG $TASR $ISRG $AMZN $NFLX $LRAD $T
Top ETF Funds
2 Sep 14 15:54:41
Capital IQ Breaks Down The Eurozone Recovery.. http://t.co/qcA3scSCKb $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:54:24
Best & worst August ETF sectors.. http://t.co/45GXSwVYf6 $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:54:08
Is a big pop coming in tech stocks?.. http://t.co/klYh8b4Xmd $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:53:51
Bid-to-cover ratio strong for 4-week T-bills despite high supply.. http://t.co/QzzzwfyTjf $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:53:35
A New Trading Month Brings the Same Old Stock Market Conditions.. http://t.co/9jVyA4o74F $SPY #ETF #ETFs #Stocks
A COMPLACENT TRADER
2 Sep 14 15:53:26
$SPY help up beautifully w today's move $TNX #Hawkish is #Bullish IF the $FED won't do IT, Wall Street will! New Neutral? - unlikely.
Top ETF Funds
2 Sep 14 15:53:18
Today's Thorns, Roses and All Time Highs in the Markets..... http://t.co/o4LiOhzShx $SPY #ETF #ETFs #Stocks
Top ETF Funds
2 Sep 14 15:53:02
Why Gallup’s consumer spending measure affects labor markets.. http://t.co/8FBYyUeGmT $SPY #ETF #ETFs #Stocks
♥ @MyOrgone ♥
2 Sep 14 15:50:07
Dump $TSLA!!! Make 100% a year with our 'Top 10 Hedge Fund' Artificial Intelligence - http://t.co/JnYV7VSLtQ $SPY $QQQ
Stock Market News
2 Sep 14 15:47:47
$SPY: SPDR S&P 500 ETF Trust (SPY): Is Soros Aiming For a Big Correction? http://t.co/APXwGUcqhR http://t.co/OIdUJnFyOG
Family Investor
2 Sep 14 15:47:33
Even The Council On Foreign Relations Is Saying It: Time To Rain Money On Main Street $SPY #investing #FED http://t.co/cQ6738HrBb
Trade n  Perform
2 Sep 14 15:44:45
@RyanDetrick The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music here) $SPY"
AlejandroMasari
2 Sep 14 15:44:35
"@howardlindzon: Noted @RyanDetrick The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. $SPY"
Eric Parnell, CFA
2 Sep 14 15:39:40
RT @faminvestor: Rising Risks In The Quest For Yield $SPY @GerringCapital http://t.co/5HXonKvwNe
A
2 Sep 14 15:39:33
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
Mark McCabe
2 Sep 14 15:39:04
RT @ChartingStock: $SPY New All Time High Hit=$201 Support $199.82 $199.39 $199.15 $198.74 $198.08 $197.44 $196.69..Manage Risk $SPX $ES_F
Jeremy Hill
2 Sep 14 15:37:18
Markets for the rest of the year via @BloombergTV via interview by @juleshyman here: http://t.co/2mgWKbJwIv $SPY
ChartingStock
2 Sep 14 15:37:03
$SPY New All Time High Hit=$201 Support $199.82 $199.39 $199.15 $198.74 $198.08 $197.44 $196.69..Manage Risk $SPX $ES_F
Fractal Forecasting
2 Sep 14 15:34:27
What is the $SPY going to do next? Get real time alerts and analysis at http://t.co/fRJvNGHFjy
Family Investor
2 Sep 14 15:33:55
Rising Risks In The Quest For Yield $SPY @GerringCapital http://t.co/5HXonKvwNe
Alex Bloomfield
2 Sep 14 15:32:56
RT @RyanDetrick: Sept after a strong Aug does appear to be rather weak historically. $SPY http://t.co/m7CFWwm5Li
ETFguide.com
2 Sep 14 15:30:16
Warren #Buffett is (once again) Doing the Opposite of the Crowd http://t.co/C0CjlnX0dB $BRKA $SPY $SPXL $SPXS
UnionSquare Research
2 Sep 14 15:28:17
RT @HFMLarryBird: I would like to see a risk mngr deconstruct a $2-$10bn HF 13F equity book+create an optimal short book for the next 6 mo …
Gil Cantu
2 Sep 14 15:26:57
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
Antonio Costa
2 Sep 14 15:24:44
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
Andreas Wolf
2 Sep 14 15:24:21
I honestly believe this Sept will be different for the markets. I think we will end the month flat or positive. $SPY
Hedge Broker
2 Sep 14 15:24:06
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
Larry Bird
2 Sep 14 15:24:00
I would like to see a risk mngr deconstruct a $2-$10bn HF 13F equity book+create an optimal short book for the next 6 mo BMV flat (no $SPY)
CMCMFIN
2 Sep 14 15:23:11
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
howardlindzon
2 Sep 14 15:22:59
RT @RyanDetrick: Think about this. The $SPX was up >+3% and made a new all-time high in August in 1987 and 2000. Ha. (insert scary music…
Park Research, LLC.
2 Sep 14 15:16:15
$SPY 200 Straddle 5 Sep 14: $1.56. PRC Option Fair Value: $2.12
Mah Bizzle
2 Sep 14 15:14:38
I $spy a falling wedge $PCLN
PlungeProtectionTeam
2 Sep 14 15:14:00
Last time stocks went ballistic like this was end of Jan. After that was a reversal. Just an observation so trade accordingly $SPY $UVXY
howardlindzon
2 Sep 14 15:13:41
RT @StockTwits: The NYSE advance‒decline line is once again hitting new‒all time highs. CHART: http://t.co/SUSQkEpvJD $DIA $SPY
howardlindzon
2 Sep 14 15:13:31
RT @StockTwits: The StockTwits Weekly email is out! Read it now right here --> http://t.co/M6uKm3PQyF $AAPL $QQQ $SPY
Justin M. Overdorff
2 Sep 14 15:12:42
Is A Big Pop Coming In Tech Stocks? $QQQ $SPY $TLT http://t.co/tkkMhzd8e0 via @stocktwits
SmartTraderTips
2 Sep 14 15:11:46
$SPY a long "IF" 201 is broken, targets 202.31 & 204.32. Bears need to retake 199.4 first. $ES_F $SPX http://t.co/7JezSi00Dp
Pablo Ricatti
2 Sep 14 15:07:27
RT @WrigleyTom: 12 Stocks Warren Buffett Loves in 2014 | @TheStreet @Stockpickr --- Link: http://t.co/sxG1Tc64GA $V $WMT $IBM $VZ $USB $GM…
Pablo Ricatti
2 Sep 14 15:05:55
RT @WrigleyTom: 17 stocks make September a month to remember | via @mattkrantz @SPCapitalIQ --- Link: http://t.co/IBSOpVbBOJ $SPY http://…
laurena retimi
2 Sep 14 15:03:34
RT @RedDogT3: Here is a link to today's video recap and look ahead $spy $spx $qqq $aapl $tsla $fb $twtr $arwr $ms $bac $gld http://t.co/Cj…
SmartTraderTips
2 Sep 14 15:01:06
$SPX a long "IF" 2006.12 is broken, targets 2024.48 & 2044.91. Bears need to retake 1991.39 first. $ES $SPY http://t.co/7DetufEa7I
Patrick
2 Sep 14 15:00:05
#TOPTICKERTWEETS $DGLY $AAPL $SPY $TSLA $ISNS $FB $FXI $EWJ $TWTR $SPX #quantheta
TalkMarkets
2 Sep 14 14:56:18
Is A Big Pop Coming In Tech #Stocks? $XLK $SPY $TLT $FDN $YELP $WBMD $TRUE $DMD $QQQ $VOO http://t.co/dbarnuK4GG
CapCube 2.0
2 Sep 14 14:55:10
$SPY targets: 201, 202, 203, 204 .... 211 higher; 200, 199, 198, 197, 196, 195 ...190 lower. My magic technicals ...
Financial Iceberg
2 Sep 14 14:51:19
SP500 Emerging Financials ( XLF - EMFN ): Still Into an Uptrend Channel ? $SPY, $SPX, $ES_F, $EEM, $EMFN http://t.co/S6IEJT9pc2
				
				
By  +Follow October 3, 2013 6:11AM
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