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Equities ETFs Nosedive on Potential US Debt Fight

By  +Follow October 3, 2013 6:11AM
Tickers Mentioned:

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
The LincolnList
22 Nov 14 18:30:03
5 wealthy people who were broke most of their lives http://t.co/uuBK1DHMaS $SPY $MBLY
22 Nov 14 18:19:03
RT @SirTitan45: It pains me 2 have 2 begin this initiative but i will have to repeat 2013 & buy some $spy and $qqq calls. I will still be b…
Joseph Teofilo
22 Nov 14 18:18:49
It pains me 2 have 2 begin this initiative but i will have to repeat 2013 & buy some $spy and $qqq calls. I will still be buying gold miners
Sherard Leary
22 Nov 14 18:15:53
RT @lancejepsen: GST Stock Trader News $SPY $IWM $QQQ http://t.co/EFMzTe44Q1
22 Nov 14 18:08:48
RT @MarketsRecap: Everyone Wants Dollars (Again) by Marc Chandler $UUP $UDN $FXE $FXB $FXY $SPY http://t.co/FZYRQj0DYp
Taylor Thoen
22 Nov 14 18:02:15
RT @StockTwits: A history of Quantitative Easing and the stock market. All seen on one chart http://t.co/whPtyQQs2k $SPY $SPX http://t.co/m…
Poor Will
22 Nov 14 17:52:20
RT @gtlackey: Happy Thanksgiving! No password needed for this week's report: November 23, 2014 Strength In Numbers http://t.co/TC8GTg5zRd …
Kevin Brent Cook
22 Nov 14 17:48:38
$VIX To conclude, read my stream today to grasp why I say "TA on VIX is dumb." Observing&ExploitingExtremes = $$. But TLs&MAs =DunceCap $SPY
Jarrod Snyder
22 Nov 14 17:48:21
RT @lancejepsen: Impeach Obama He's Driving the Country Bankrupt $SPY $QQQ $IWM http://t.co/SdmWvSOUXx http://t.co/kdtASlbSSQ
22 Nov 14 17:37:53
RT @alphatrends: "@StockTwits: Just remarkable to watch IPOs this year. Chart from @IPOtweet. More than 260 YTD $IPO $SPY: http://t.co/gjaB…
Czcibor Jurisch
22 Nov 14 17:34:20
alex demache
22 Nov 14 17:26:07
RT @MaxGanik: MACD about to go negative in $SPY $SPX and $QQQ. This could lead to a small correction before a santa claus rally.
alex demache
22 Nov 14 17:25:16
RT @seeitmarket: S&P 500 Technical Update: Oops, Central Banks Did It Again [w/ Fibs & Levels] http://t.co/CSTE9YOn17 by @andrewnyquist | …
22 Nov 14 17:23:59
There are a lot of #Grubers hawking the markets, some well known amongst us. $SPY $TLT #SUCKER
alex demache
22 Nov 14 17:22:36
RT @harmongreg: $SPY Trends and Influencers November 22, 2014 - Dragonfly Capital http://t.co/zeDejU1iql $IWM $QQQ $VXX $TLT $EEM $GLD $USO…
22 Nov 14 17:20:55
$SPY OI for maturity 11/22/2014. 150.00 Highest put. 210.00 Highest call. http://t.co/hxSHHhYUF1
Abel Daltrey
22 Nov 14 17:15:41
aJefqWkhPn Midweek Stock Mkt Analysis 10/22/14 $SPY $QQQ $IWM $XLF $SMH $AAPL
AliEn BraInZ
22 Nov 14 17:13:24
$SPY $DJA U.S. Stocks are 2nd Most Overbought In History http://t.co/WoVe6KICBS via @YahooFinance
22 Nov 14 17:10:27
Tell us what you think about this weeks $SPY alert. How are you trading it? http://t.co/TUfkM6FFt6
22 Nov 14 17:06:45
My Blog/Stocks/Promos http://t.co/8hFk27Db1x via @wordpressdotcom $SPY $FB $TWTR $DJIA
22 Nov 14 17:03:05
$SPY Max Pain is 200.00 for maturity 11/22/2014. Price = 206.68. http://t.co/crrnEdebk9
22 Nov 14 17:02:11
Potential $SPY & $MDY Tax-Loss Selling Candidates http://t.co/rVnjzrXgpa #taxes $SPX #TheBigPicture #consumerdiscretionary #energy $CLF
stephen moran
22 Nov 14 16:56:16
Chart for Study - $SPY - New Highs...Again http://t.co/JS2vKjqnYB via @weebly
Lach 14
22 Nov 14 16:51:30
$SPY Best 3 ETFs from 10/15 low: $USD +39%, $RXL +28%, $QLD +28% , as Semi's Drugs and NASD up big. http://t.co/GmYkVFUNlD
22 Nov 14 16:45:55
RT @KevinBCook: $SPY 2 of 2: have just proven that you never understood how $VIX calculated & your quant skills are illusory & in need of s…
22 Nov 14 16:41:47
Read this $SPX $SPY journal and you will have good idea of what to expect in the week ahead. http://t.co/F577gOHuZD
22 Nov 14 16:39:50
$SPY Charts, lines, bars & such are fun when used to predict but the real question - what will precipitate the break when it does occur #TLT
Ian Nelson
22 Nov 14 16:38:26
RT @Taarriqq: $BABA $GPRO $TSLA $FB $TWTR $SPY $QQQ $VXX $PXD $MPEL $CRM $WYNN How we traded with institutionals, plz share https://t.…
TalkMarkets Recap
22 Nov 14 16:33:18
Everyone Wants Dollars (Again) by Marc Chandler $UUP $UDN $FXE $FXB $FXY $SPY http://t.co/FZYRQj0DYp
The LincolnList
22 Nov 14 16:30:08
Part time swings but full time gains. +75% YTD gains and only 6 losers since March http://t.co/dtGEzJ35fV $SPY $CANF
Caelyn Grzelczyk
22 Nov 14 16:19:02
Good Morning Traders!! Letas rock n roll today. $SPY $VXX #HFT
22 Nov 14 16:18:04
A history of Quantitative Easing and the stock market. All seen on one chart http://t.co/AaGahclexH $SPY $SPX http://t.co/XNQFlynjcf
Trade Group™
22 Nov 14 16:18:03
A history of Quantitative Easing and the stock market. All seen on one chart http://t.co/6GGgMM37r3 $SPY $SPX http://t.co/bUD7Vd58lb
22 Nov 14 16:17:01
Full portfolio details, updated weekly at http://t.co/afbzGpOYuN $SPY $AAPL $GRPN
22 Nov 14 16:16:47
5 Things To Ponder: Rising Risk http://t.co/yXoGoY6Hn5 $SPY $SPX
22 Nov 14 16:14:20
Portfolio Update: Nov. 21, 2014: +4.2% versus +2.25% S&P500 November http://t.co/yA5BtafryE $AAPL $SLY $SPY $FOSL $FCN $CLS $GLW $GRPN $TXT
PennyStock Zone
22 Nov 14 16:01:00
Is this stock analyst lucky or what? http://t.co/nGpJsAI10D #stocks #trading $SPY $STUDY $LNKD $LIVE #pennystocks
Kevin Brent Cook
22 Nov 14 15:53:52
$SPY 2 of 2: have just proven that you never understood how $VIX calculated & your quant skills are illusory & in need of statistical rigor
Yusuf Kuzu
22 Nov 14 15:52:58
RT @StockTwits: A history of Quantitative Easing and the stock market. All seen on one chart http://t.co/whPtyQQs2k $SPY $SPX http://t.co/m…
Kevin Chu
22 Nov 14 15:52:38
RT @StockTwits: A history of Quantitative Easing and the stock market. All seen on one chart http://t.co/whPtyQQs2k $SPY $SPX http://t.co/m…
Kevin Brent Cook
22 Nov 14 15:44:52
$SPY You can look at $VIX chart to mean revert from volatility grind lower in $SPX rally. But soon as you slap trend line or MA on it, you..
22 Nov 14 15:44:07
http://t.co/6I8VNnRkyA <--- Amazing subscriber to Super_Trades - check out his profit chart!!! $CREE $AWRE $SPY $HLX $RGLS
22 Nov 14 15:42:16
RT @zentrader: S&P 500 Stretched Like A Spring $QQQ $SPY http://t.co/FcY5T0Rxna
GSK Wealth Builders
22 Nov 14 15:38:51
RT @YahooFinance: Tony Robbins: Ray Dalio’s “All Weather” Portfolio http://t.co/89WSIMWmvP via @tonyrobbins $SPY $TLT $AGG $GLD http://t.co…
jeff pierce
22 Nov 14 15:35:37
S&P 500 Stretched Like A Spring $QQQ $SPY http://t.co/FcY5T0Rxna
22 Nov 14 15:35:37
S&P 500 Stretched Like A Spring $QQQ $SPY http://t.co/26ViMMusvi
22 Nov 14 15:20:10
ClayTrader: * * $SPY Video Chart 11-21-14 * * http://t.co/KzqUUrK8B3
Business Ventures
22 Nov 14 15:18:04
Top story: @RampCapitalLLC: 'ICYMI: Updated $SPY entry points $STUDY …' http://t.co/lwZjz1Y3as, see more http://t.co/tg2jBvNZhg
$PKGM$ alerted 2day
22 Nov 14 15:13:28
ClayTrader: * * $SPY Video Chart 11-21-14 * * http://t.co/nqqCyTOmmT
Gabriel Haukness
22 Nov 14 15:12:13
$SPY breaks resistance marking 5 rallying weeks. Daily and hourly RSI both above 70. Hit most take profit levels, cash is ok for me here.
By  +Follow October 3, 2013 6:11AM



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