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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for SPY
DvNet
30 Aug 15 18:50:37
The Bond Bear That Cried Wolf - http://t.co/qXBG0iD3of $spy $lqd
Stocks & Trades
30 Aug 15 18:49:08
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Brad Wisler
30 Aug 15 18:48:56
RT @StockTwits: Print this. Hang it on your wall. The long history of crashes, rallies and bull markets: http://t.co/2pLYBcnChe $SPY http:…
Dan
30 Aug 15 18:45:56
$SPY high open interest range is 190.00 to 215.50 for option expiration 09/04/2015. http://t.co/P1cNrAziW5
Dj
30 Aug 15 18:45:44
RT @DeweyKnows: And futures are already suggesting another wild open + lower market tomorrow. $SPY #VIX #TLT #ChinaMeltdown http://t.co/m7K…
kams
30 Aug 15 18:45:36
$ES_F $SPY, China Japan open now and ES_F stable with a good base at 1970s. Up we go from here.... green by morning.
GuerillaStockTrading
30 Aug 15 18:44:53
Why The Fed Is In a Rush To Raise Rates $SPY $QQQ $IWM https://t.co/EqekR5LhEs http://t.co/IINuQuXXQr
-95%BlownUp
30 Aug 15 18:44:51
RT @nobullshytrader: $SPY $DIA PONZ NO BOUNCE so far wow http://t.co/Bkadvzaj5E prolly green by 4pm tho
Warrior Trading News
30 Aug 15 18:44:14
$SPY $EBAY $AAPL $FB $TWTR $VIX $QQQ https://t.co/NB6vRNEkma
Pablo
30 Aug 15 18:43:57
RT @StockTwits: The major indexes and their performance. Since the Financial Crisis. UPDATED: http://t.co/bNbB1T5T64 $SPY $DAX http://t.co…
BILL MATARI
30 Aug 15 18:43:57
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Dewey Knows
30 Aug 15 18:40:11
And futures are already suggesting another wild open + lower market tomorrow. $SPY #VIX #TLT #ChinaMeltdown http://t.co/m7KJWNpDKm
Gerardo Pérez
30 Aug 15 18:39:56
RT @clusterstock: The cost of succumbing to fear $DIA $SPY $SPX $QQQ http://t.co/MbxmCou8EM http://t.co/u57Psj8H98
DE Asset Management
30 Aug 15 18:39:51
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Jea Yu
30 Aug 15 18:38:44
$SPY monthly chart analysis from Wil of UndergroundTrader http://t.co/SZTgrnjRfu
Dj
30 Aug 15 18:38:32
RT @McMcbillion43: $SPY $ES_F http://t.co/Z0u9K3q5sI
Starving Artist
30 Aug 15 18:35:14
@nachoswithsalsa I'm getting myself psychologically prepared… I've been trading $SPY for a while now… It's the same thing, just bigger.
Madhu
30 Aug 15 18:34:18
RT @Sassy_SPY: $SPX ranges this week: Monday 119 points Tuesday 83 points Wednesday 70 points Last hour Thursday 81 #normal $SPY
McBillion
30 Aug 15 18:33:56
$SPY $ES_F http://t.co/Z0u9K3q5sI
Dan
30 Aug 15 18:31:36
$SPY Max Pain = 201.00. Maturity = 09/04/2015. Previous close = 199.28. http://t.co/aNOgqCRWTS
Olivia
30 Aug 15 18:28:54
https://t.co/yBBRdJofYn Sign in Yosemite National Park 1915 but seems fitting for the market right now. $spy $aa… http://t.co/xXbcWJsEc7
TheDallasRealtor
30 Aug 15 18:27:28
Sign in Yosemite National Park 1915 but seems fitting for the market right now. $spy $aapl http://t.co/4KAyzcIhKH
Jea Yu
30 Aug 15 18:26:05
$SPY bulls not out of the woods yet. Key 'line in the sand' at 198.52 battle for monthly candle close on Monday! http://t.co/Nk1W1ltr4z
Michael Stanley
30 Aug 15 18:25:58
RT @Sandro_power: $QQQ $SPY in this Video http://t.co/b4XP3mhk5U I talk about my $AAPL updates and the direction this market can take from…
Damian Lundgren
30 Aug 15 18:25:02
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Ambiguous
30 Aug 15 18:22:48
RT @szaman: Trading Watch List 08.31.2015 http://t.co/pwCARt3Dmw $CLTX $EBIO $FB $MBLY $TSLA $NFLX $USO $SPY .
ATRbars
30 Aug 15 18:21:28
$SPY yea I see bonds really getting a bid here lol...
Quartermaster
30 Aug 15 18:20:42
$qqq $spy +37
Quartermaster
30 Aug 15 18:19:54
But how u gonna sell those puts when $spy is green tomorrow
Options Chris
30 Aug 15 18:19:18
Catching up now after being away for most of August. To quote Lloyd Christmas re: $SPY "boy, this party really died" https://t.co/bPyCnkSbs1
Mr.Incredible
30 Aug 15 18:19:02
Ok guys lets go back to Friday after hours price $SPY /ES
João Almeida
30 Aug 15 18:17:04
RT @androsForm: $DJIA $SPY Black(er) Monday Looms: Dow Futures Down 220 After J-Hole Speeches & China Fold http://t.co/GoDbZME3Th #stocks
Camilo Gomez
30 Aug 15 18:16:46
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Mayor McCheese
30 Aug 15 18:16:31
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Dathan Pyle
30 Aug 15 18:16:21
Where every Fed member stands on raising interest rates. http://t.co/jD6j1Havh1 $SPY $QQQ $VIX
rahagar
30 Aug 15 18:15:41
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
kenr0966
30 Aug 15 18:14:47
RT @PipsToDollars: My $SPY OCT PUTS.....ITM $$$
Frank Trades
30 Aug 15 18:14:43
"@mtbigsky: $DIA $SPY $ES_F $TF_F $STUDY Blog Post: The Dead Cat Bounce http://t.co/2Yuris1LNx" http://t.co/2FzRyEEpvi
Miller-Rockefeller
30 Aug 15 18:14:34
If you're really "super-scared" over the markets you should just sell... $SPY $SPX $VIX $VXX $AAPL $QQQ
androsForm
30 Aug 15 18:14:18
$DJIA $SPY Black(er) Monday Looms: Dow Futures Down 220 After J-Hole Speeches & China Fold http://t.co/GoDbZME3Th #stocks
howardlindzon
30 Aug 15 18:13:45
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Leilani Pips™
30 Aug 15 18:13:21
My $SPY OCT PUTS.....ITM $$$
Antoine Larigaudrie
30 Aug 15 18:13:08
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Jorge A. Beltràn P.
30 Aug 15 18:12:42
RT @SJosephBurns: What $SPY Chart Signals are Saying here: 8/30/15 http://t.co/nZxdC6FCej
Chris Z
30 Aug 15 18:12:15
@kunal00 If $SPY were a singer it'd be Elton John right now!
Haki Hika
30 Aug 15 18:11:32
RT @AggieCapitalist: @AggieCapitalist The broader market did actually made a new low and bottomed the first week of December. #volatility $…
Haki Hika
30 Aug 15 18:11:27
RT @AggieCapitalist: Take a look at the 1987 Black Monday price action. Our recent volatility doesn't hold a candle to it. $SPY http://t.co…
Jeanpol Andrei
30 Aug 15 18:10:48
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
Quartermaster
30 Aug 15 18:09:41
/NQ +27 so far. $spy green by tomorrow close I think at the latest
Wal
30 Aug 15 18:09:23
RT @StockTwits: Here's the S&P 500, Nasdaq and Dow flipped upside down. Would you BUY or SELL these? http://t.co/HTzFJDluiW $SPY http://t.…
				
				
By  +Follow October 3, 2013 6:11AM
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