Dow Futures Slide As Budget Shutdown Deadline Approaches

Stock index futures suggest a sharp opening drop for the Dow Jones and S&P 500 this morning, as US lawmakers’ failure to approve a new budget means that up to 800,000 federal employees may be sent on unpaid leave from tonight.

Roland Head

Roland is an experienced investment writer and analyst with a particular focus on dividend investing and value opportunities. He's been writing for the Motley Fool since 2012 and also contributes to other UK investor platforms, such as Stockopedia. Roland holds the CFA UK Investment Management Certificate (IMC) and has passed the CFA Level 1 exam. A keen private investor, he also runs an internet business.

Published 30 September, 2013 12:59 pm BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

LONDON — Stock index futures at 7am ET indicated the Dow Jones Industrial Average (DJINDICES: ^DJI) may open down by 0.85% this morning, while the S&P 500 (SNPINDEX: ^GSPC) may open 0.90% lower, as a partial US government shutdown from midnight — when the federal government’s 2014 fiscal years starts — looks increasingly likely.

Republicans and Democrats remain locked in a standoff about the implementation of President Obama’s health care policy, and if no budget agreement is reached by tonight, then up to 800,000 federal employees may be put on unpaid leave, according to Bloomberg.

CNN’s Fear & Greed Index has dropped further into the fear zone over the weekend, and is expected to open at 34 this morning, down from 39 on Friday.

European markets slid this morning as investors responded to the twin threats of a US government shutdown and the possibility that Italy’s coalition government will collapse, following Silvio Berlusconi’s weekend withdrawal of his ministers from the coalition cabinet.

Italy’s Prime Minister, Enrico Letta, faces a confidence vote on Wednesday that could mark the end of his term of office and trigger new elections. At 7am ET, the FTSE 100 was down 0.86%, the DAX was down 1.07%, and the CAC 40 was down 1.29%, and Italy’s FTSE MIB was down 1.84%.

Today’s US economic outlook is likely to be dominated by the threat of the first government shutdown since 1995. Also of interest may be the September Markit flash PMI, which is expected to have fallen back to 52.8, from 53.1 in August.

On the corporate front, Cal-Maine Foods reported fiscal first-quarter earnings of $0.36 per share on net sales of $319.5m earlier this morning, compared with $0.39 and $272.9m for the same period last year.

Paychex is expected to report first-quarter earnings of $0.43 per share, after markets close tonight.

J.C. Penney Company stock may be active once more after the retailer’s shares closed down 13% on Friday and were 30% down on the week, following the start of an 84 million share offering aimed at raising up to $1bn to help the troubled retailer fund its turnaround plans.

Banks stocks could also be active today; Bank of America was down 1.5% in pre-market trade, while JPMorgan Chase & Co was lower in German trading this morning.