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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
Lach 14
22 Oct 14 01:01:17
$SPY Russell still lags on this bounce - From the 10/16 close (low): $QQQ +7.5%, $SPY +4.2%, $IWM +2.5%.
Alysia Sarkisian
22 Oct 14 01:00:07
RT @SeekingAlpha: Is The Stock Market Rally For Real? http://t.co/VhoORWwnEX $TLT $SPY $DIA $QQQ $IWM
Stockaholics
22 Oct 14 00:56:34
Our Penny Stock Picks Gained 371% In 2 Weeks! Get Our Next Pick Early: http://t.co/z2noBUWrEP $LEN $SPM $SPY
Seeking Alpha
22 Oct 14 00:53:24
Is The Stock Market Rally For Real? http://t.co/VhoORWwnEX $TLT $SPY $DIA $QQQ $IWM
Steve Walker
22 Oct 14 00:51:44
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Arnie Friedland
22 Oct 14 00:49:28
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Alpha Maven
22 Oct 14 00:48:48
RT @RedDogT3: Here's a link to today's video recap and look ahead $spy $xle $oih $aapl $baba $twtr $fb $celg. $gild http://t.co/ltgLhYcWl7
Uptown Bill's
22 Oct 14 00:46:27
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
TalkMarkets
22 Oct 14 00:43:48
T2108 Update – Revenge Of The Bulls As Oversold Conditions Quickly Fade Away $SSO $UVXY $VIX $COMP $SPY @DrDuru http://t.co/CTim4HLDlS
Alpha Maven
22 Oct 14 00:43:34
RT @SeekingAlpha: Why Transportation Stocks Are Outperforming The Market http://t.co/lzHnQJ2wq8 $AAL $CSX $FDX $LUV $SPY $UAL $UPS $IYT
Finding Technicals
22 Oct 14 00:39:05
a bearish $SPY pattern – 21 Oct 2014 http://t.co/15lWH5gHw2
Edouard
22 Oct 14 00:37:23
RT @paststat: a pull back $SPY pattern which suggested a pull back 28/31 times , since Y2K http://t.co/PjJoasjRK7 $STUDY
Michele Carretta
22 Oct 14 00:36:14
RT @SeekingAlpha: Why Transportation Stocks Are Outperforming The Market http://t.co/lzHnQJ2wq8 $AAL $CSX $FDX $LUV $SPY $UAL $UPS $IYT
Northy
22 Oct 14 00:35:31
RT @paststat: a pull back $SPY pattern which suggested a pull back 28/31 times , since Y2K http://t.co/PjJoasjRK7 $STUDY
US Banking News
22 Oct 14 00:33:00
Short Interest in SPDR S&P 500 ETF Trust Drops By 5.8% $SPY http://t.co/Trnms0hDWJ
SI Fractalerts
22 Oct 14 00:29:32
What is the $SPY going to do next? Get real time alerts and analysis at http://t.co/4xdmwh5gCc
Anthony Gil, .
22 Oct 14 00:25:40
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Ali
22 Oct 14 00:22:59
RT @alphatrends: the $SPY has retraced almost exactly 61.8% of the Sept high to Oct Low in just 4 days http://t.co/nDuIQL5Xoo
Lach 14
22 Oct 14 00:22:57
$SPY Tim Seymor of Fast M:" I was actually buying IWM puts today & QID, which is the double Nasdaq short, ways to play overbought market."
Fractal Index
22 Oct 14 00:22:06
New $SPY alerts http://t.co/YUvphotMPS have recently been posted. Check them out now.
Michael Harris
22 Oct 14 00:21:57
S&P 500 Low Volatility ETF New All-Time Closing High http://t.co/o5hdcUTywz $SPY $SPLV $SPHB
Fractal Traders
22 Oct 14 00:17:09
Confidently trade $SPY http://t.co/4F4Q0sQA4R
Melanie
22 Oct 14 00:12:05
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
SiteRapture
22 Oct 14 00:09:43
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Joel R
22 Oct 14 00:06:44
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Seeking Alpha
22 Oct 14 00:06:39
Stocks: Is It Time To Get Back In? http://t.co/Bz2fkIX6lf $SPY $DIA $QQQ $IWM
Fractal Alerts
22 Oct 14 00:04:41
Confidently trade $SPY http://t.co/9jf5gxvzAI
Alfred Boyer
22 Oct 14 00:04:16
RT @lancejepsen: Institutional Trader Buying Detected on the TICK $SPY $TICK http://t.co/44uuPene5g #StockTrading http://t.co/6gAasBxKdW
Kora Reddy
22 Oct 14 00:02:44
a pull back $SPY pattern which suggested a pull back 28/31 times , since Y2K http://t.co/PjJoasjRK7 $STUDY
alberta
22 Oct 14 00:00:43
RT @andrewunknown: There are no words for this. $ES_F $SPY $SPX http://t.co/YF1uxcMvlj
TRADEaddiction
21 Oct 14 23:57:24
trade em well and cut losses ! $SPY $DAX
Walter Live Oak
21 Oct 14 23:55:48
RT @toolbox87: This is how I saw $SPY by the day end, I did go long $VXX weekly Calls. http://t.co/8JAbRYdwZx
Fractalert
21 Oct 14 23:55:33
Tell us what you think about this weeks $SPY alert. How are you trading it? http://t.co/NyON7XojsH
Karen
21 Oct 14 23:55:23
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Jason Freeman
21 Oct 14 23:55:00
RT @paststat: a bearish $SPY pattern – 21 Oct 2014 http://t.co/ibblKzw3gY
Lach 14
21 Oct 14 23:54:38
$SPY Looks like Fast Money crowd thinks this is a "Peter Pan rally" close your eyes and try to fly. Sell @ them. http://t.co/fUzLQmVxoD
alex demache
21 Oct 14 23:54:00
RT @andrewunknown: There are no words for this. $ES_F $SPY $SPX http://t.co/YF1uxcMvlj
Burr Funeral Home
21 Oct 14 23:53:10
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
♥ @MyOrgone ♥
21 Oct 14 23:52:42
Drop $KO! Earn 100% per year using our 'Top 10 Hedge Fund' Artificial Intelligence - http://t.co/JnYV7VSLtQ @CNBC $SPY
Karla Tango
21 Oct 14 23:51:45
RT @andrewunknown: There are no words for this. $ES_F $SPY $SPX http://t.co/YF1uxcMvlj
Jefferson Crum
21 Oct 14 23:45:11
RT @lancejepsen: High Yield Debt Explodes Higher on Bullard Comments $SPY http://t.co/1BpqqVmtA3 #UsEconomy http://t.co/XgO6s0yWug
Kora Reddy
21 Oct 14 23:43:07
a bearish $SPY pattern – 21 Oct 2014 http://t.co/ibblKzw3gY
Duane Duggan, REMAX
21 Oct 14 23:42:55
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
FOREX Insight
21 Oct 14 23:42:50
RT @andrewunknown: There are no words for this. $ES_F $SPY $SPX http://t.co/YF1uxcMvlj
Call Me Baloo
21 Oct 14 23:38:38
best positive readings of the year on some indicators $SPY http://t.co/g9VMngP1gh
Kelly
21 Oct 14 23:38:04
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Andrew Kassen
21 Oct 14 23:37:03
There are no words for this. $ES_F $SPY $SPX http://t.co/YF1uxcMvlj
Jon Magarifuji
21 Oct 14 23:35:53
RT @philstockworld: What Lines We're Watching and How to Play them in our Short-Term Portfolio: $SPY $IBM $DIA $IWM $TNA #Hedging -- http:…
Call Me Baloo
21 Oct 14 23:34:54
once PMO crosses Bulls could get an additional freak-out $SPY http://t.co/p32VlUFyHr
Sentimentcharts
21 Oct 14 23:34:02
RT @sentimentrader: When the put/call ratio >1 and $SPY >+1.5% during a bull mkt. A week later, it added to gains only 4 times. http://t.…
				
				
By  +Follow October 3, 2013 6:11AM
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