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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
Embroidery On Demand
31 Oct 14 14:45:06
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
dynofuz
31 Oct 14 14:45:01
Mon (Nov 03, 2014) US markets $SPY $DJIA & $NASDAQ will close HIGHER. #marketpredictions
SH
31 Oct 14 14:44:49
$SPX Megaphone. Expect ATHs, choppiness through EOY. Think reversion to 1965 by Feb 2015. $SPY http://t.co/PrDOA0XYwZ
Erika
31 Oct 14 14:44:32
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
John .
31 Oct 14 14:44:26
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
John .
31 Oct 14 14:43:56
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Gail Blanke
31 Oct 14 14:43:24
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Gail Blanke
31 Oct 14 14:43:12
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Day Trade Alerts
31 Oct 14 14:43:09
RT @Estimize: Apple Watch Giveaway Update & Sector Leaderboard Halftime Report $SPY $^GSPC http://t.co/QhXJTQUq3m http://t.co/FI1tFFtd4h
Angelo
31 Oct 14 14:42:56
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Angelo
31 Oct 14 14:42:40
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
♥ @MyOrgone ♥
31 Oct 14 14:42:15
Sell $AAPL!!! Earn 100% a year using our 'Top 10 Hedge Fund' Artificial Intelligence - http://t.co/x7MDlPJXnp @CNBC $SPY
WFHB
31 Oct 14 14:41:30
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Lisa
31 Oct 14 14:41:21
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
TP Strategic Partner
31 Oct 14 14:41:10
$SPY $GE Give me sewage treatment, or give me #Ebola . The 3rd world cry is NOW.
WFHB
31 Oct 14 14:41:01
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Lisa
31 Oct 14 14:40:45
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Autobahn Volvo
31 Oct 14 14:39:26
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Autobahn Volvo
31 Oct 14 14:39:06
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Annu Kristipati
31 Oct 14 14:39:01
RT @StockTwits: THIS chart shows the correction that was -> http://t.co/ZmYbZUmNCY $SPY
Jonathan Chevreau
31 Oct 14 14:38:57
RT @StockTwits: THIS chart shows the correction that was -> http://t.co/ZmYbZUmNCY $SPY
Darla Stapleton
31 Oct 14 14:38:30
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Darla Stapleton
31 Oct 14 14:37:55
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Aculocity
31 Oct 14 14:37:36
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Aculocity
31 Oct 14 14:37:01
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
TP Strategic Partner
31 Oct 14 14:36:54
$SPY India needs skyscraper condos. You can't build these if there is a risk of brownouts, power outages, lack of sewage and water. Fix it!!
Ben Bennett
31 Oct 14 14:36:37
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
kenr0966
31 Oct 14 14:36:21
RT @mrdollamaker: $SPY Some Really Nice Tweets I Received Today On StockTwits. - http://t.co/epHfcO3zBZ http://t.co/b6DFeLjGXO
Carley Noelle
31 Oct 14 14:36:06
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Ben Bennett
31 Oct 14 14:36:05
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
artintelbot
31 Oct 14 14:35:56
Dump $AAPL!! Earn 100% per year with our 'Top 10 Hedge Fund' Artificial Intelligence - $SPY $QQQ http://t.co/V5krQM4XpS
Carley Noelle
31 Oct 14 14:35:46
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Sugar Hill Body
31 Oct 14 14:35:41
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Carley Noelle
31 Oct 14 14:35:24
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
John Spatta
31 Oct 14 14:35:23
Another one for October, $FB (2.04%) $TWTR (17.16%) $SPY +3.69%
Bob Rountree
31 Oct 14 14:35:17
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Sugar Hill Body
31 Oct 14 14:35:12
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Sugar Hill Body
31 Oct 14 14:35:00
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Bob Rountree
31 Oct 14 14:34:58
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Bob Rountree
31 Oct 14 14:34:18
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Anthony BJORNSTEDT
31 Oct 14 14:34:18
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Anthony BJORNSTEDT
31 Oct 14 14:33:44
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Kellie
31 Oct 14 14:33:40
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Anthony BJORNSTEDT
31 Oct 14 14:33:20
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Kellie
31 Oct 14 14:33:16
RT @philstockworld: WTF? Futures Flying and Dollar Rising on BOJ's 80 TRILLION Yen Boost $SLW $USO $SPY $EWJ -- http://t.co/RjS6KZhKzM htt…
Kellie
31 Oct 14 14:32:50
RT @philstockworld: Bad German Retail Sales Gives Us a Futures Shorting Opportunity $IWM $SPY $QQQ $DIA #FuturesTrading -- http://t.co/Jj43…
Mr Popular
31 Oct 14 14:32:15
Nice monthly candle. Have to go back to Oct 98 to see one like that. $QQQ $SPY $DIA $IWM
ShoreTrips
31 Oct 14 14:32:10
RT @philstockworld: Fedless Thursday Update - How We're Playing the End of QE! $AAPL $SPY $DIA $QQQ $IWM #Stocks #Futures #Options -- http…
Mrodddy
31 Oct 14 14:32:09
Check out $SPY V-bottoms angles. Most recent almost went STRAIGHT up! 80.55° from low to high. http://t.co/YvE1TsHyRG
Fractal Alerts
31 Oct 14 14:31:59
What is the $SPY going to do next? Get real time alerts and analysis at http://t.co/Zcf0D6HEDp
				
				
By  +Follow October 3, 2013 6:11AM
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