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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
Marshall Moore
25 Oct 14 07:40:24
RT @seeitmarket: Did Investment Managers Throw In The Towel This Month? http://t.co/8WtJLvl6pS by @RyanDetrick $SPY $VIX $STUDY
Erik
25 Oct 14 07:40:20
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
DHCXconf
25 Oct 14 07:39:25
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
DHCXconf
25 Oct 14 07:39:00
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
Ryan Detrick, CMT
25 Oct 14 07:38:37
RT @seeitmarket: Did Investment Managers Throw In The Towel This Month? http://t.co/nN396Hjwud by @RyanDetrick $SPY $VIX $STUDY
Hall Abernathy
25 Oct 14 07:38:29
RT @lancejepsen: GST Stock Trader News $SPY $IWM $QQQ http://t.co/tcS9pPPnZN
Genaro Dillard
25 Oct 14 07:38:28
RT @lancejepsen: $SPY VS $IWM Would have liked to see more leadership from IWM throughout the day but what a surge into the close! http://t…
See It Market
25 Oct 14 07:38:15
Did Investment Managers Throw In The Towel This Month? http://t.co/nN396Hjwud by @RyanDetrick $SPY $VIX $STUDY
donald Stark
25 Oct 14 07:38:03
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Whistling Pixie
25 Oct 14 07:37:28
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
naomihn2000
25 Oct 14 07:37:04
stop making women where burqa. u use the #quran so u can dominate us women. #ebola is in #SaudiArabia #Iran doing #Islamic work $SPX $SPY
ivan
25 Oct 14 07:36:25
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
NikiM
25 Oct 14 07:35:11
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Jordan
25 Oct 14 07:34:47
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Claire FriedrichsCPM
25 Oct 14 07:34:36
@NoanetTrader $spy on a 1y looks like a possible steep inverse H&S set up to take it over 2050 by the end of yr.
Andy
25 Oct 14 07:33:49
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Daniel Libeskind
25 Oct 14 07:33:36
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
naomihn2000
25 Oct 14 07:33:34
their actions r based on allah this #Quran that. u scums #SaudiArabia #Iran need to stop putting crack in the hookah. $SPY $SPX
armando
25 Oct 14 07:33:31
This is me and @lbhi_services planing the kill on $spy when to enter and leave the trade for profits :) http://t.co/OeSHuY1xCN
Daniel Libeskind
25 Oct 14 07:32:56
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
101 Women of Hope
25 Oct 14 07:32:35
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
101 Women of Hope
25 Oct 14 07:32:01
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
ⓢ
25 Oct 14 07:31:00
$SPY http://t.co/I6TUdYMxWt
Jesse Rau
25 Oct 14 07:30:51
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Ryan
25 Oct 14 07:30:49
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Haki Hika
25 Oct 14 07:30:43
The week that was: Realized Gains and Losses for the past week. $LAKE $IBIO $ISNS & $SPY. http://t.co/b3yVJCOPso
Ryan
25 Oct 14 07:30:37
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
Juanita
25 Oct 14 07:30:11
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
gokhan
25 Oct 14 07:29:29
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Robert Guilfoyle
25 Oct 14 07:28:40
RT @RyanDetrick: Remember at the start of the week when I said the 42nd week is historically bearish? $SPX up 4.12% is the 3rd best since …
Luisita
25 Oct 14 07:28:35
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
UUP Fractalerts
25 Oct 14 07:28:22
What is the $SPY http://t.co/JL6zHy9Bay going to do next? Get real time alerts and analysis.
Tim
25 Oct 14 07:27:30
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Tim
25 Oct 14 07:27:16
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
Kevin
25 Oct 14 07:27:14
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
wa
25 Oct 14 07:27:06
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Timothy Reazor
25 Oct 14 07:27:02
If you'd like to prepare for our radio show at 10 CT our #StockNerd video will do the trick... http://t.co/TCysa58Chp $SPY $QQQ $AAPL
Kevin
25 Oct 14 07:26:37
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
naomihn2000
25 Oct 14 07:26:13
middle east country r run by idiotic beliefs. stop making excuse for ur belief free our women from oppression #SaudiArabia #Iran $SPX $SPY
Maleah
25 Oct 14 07:24:41
http://t.co/WwRfVvXWbM <<-- Register free! I am excited for Tim Sykes special tutorial webinar! $FB $SPY $AAPL #timsykes
armando
25 Oct 14 07:22:20
This is us when we hit trades on $spy we a the trend @lbhi_services @ArmandoSeba1980 http://t.co/R6sZkGoqBH
naomihn2000
25 Oct 14 07:21:18
this is why #ebola needs to spread in middle east country #SaudiArabia #Iran $SPX $SPY http://t.co/8MkpCmoK2u
OptionsPlay
25 Oct 14 07:18:01
DailyPlay Mon Oct 27 $INFY is in a bullish trend with positive momentum. $SPY is bullish on s/t http://t.co/kftZo1sTK2
armando
25 Oct 14 07:17:58
I'm starting trading options Monday with my boy @lbhi_services we going to kill $spy and no one is going to stop us http://t.co/MLpsyWjplY
Proffitt Financial
25 Oct 14 07:17:58
RT @WallStJesus: 💡A Winning Game Plan For Successful #Options Trading ➡➡➡ http://t.co/DAk2qvdtoN $STUDY $SPY
NoanetTrader
25 Oct 14 07:17:33
Current V-shaped bounce on $SPX is different and we need to pay attention. $SPY $STUDY http://t.co/TVWA0UDMqj
Molly
25 Oct 14 07:15:36
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Heather
25 Oct 14 07:14:48
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
Heather
25 Oct 14 07:14:31
RT @philstockworld: Friday Freak-Out: #Ebola Spooks the Markets, Iron Ore Collapsing -- http://t.co/l9C4m3vxVZ $SPY $DIA $IWM $QQQ #Futur…
Kimberly McCray
25 Oct 14 07:14:10
RT @philstockworld: Friday's Fearful Outlook as #Ebola Hits NYC: $SPY $DIA $AMZN $TSLA $TM #Amazon -- http://t.co/UIMDFJvSW2 http://t.co/VN…
				
				
By  +Follow October 3, 2013 6:11AM
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