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Market Update

U.S. Treasury Market Calm as Debt Default Date Approaches

Author: Nichole Harper
Last Update: 1:45 PM ET October 03 2013

1:45 PM New York – U.S. market indexes trended lower as world investors began factoring a possible debt default and rising probabilities of a prolonged government default. With each passing day investors are debasing the fate of the reserve currency of the world.

World investors are increasingly considering a possible U.S. government debt default as politicians of both parties in Washington focus on self-preservation.

Once unthinkable, U.S. government closure has become a reality and the prolonged closure is expected to negatively impact the economy and dent consumer confidence and fragile housing market recovery.

Investors are also worried that reticent lawmakers may wait till the last minute to strike a deal but the damage will be done and investors may demand higher return on treasuries in the long run.

For now, there was no stress in the bond market and the yield on 10-year was 2.58% and gold declined 0.5% to $1,315.12 an ounce.

S&P 500 index declined 11.33 to 1,682.54 and the Nasdaq Composite Index dropped 33.26 to 3,781.76.

U.S. Treasury Secretary Jack Lew said the government is likely to run out of money by October 17.

The Congressional Budget Office, trusted by politicians and analysts, said the monthly revenues at the end of October will fall short of government obligation as payments for social security, medical insurance become due.

U.S. dollar, the reserve currency, traded near an 8-month low as Congressional politicians play fast-and-loose and shut down the government to score ideological points.

World’s patience will run out if the U.S. government closure lasts longer than two weeks and market indexes will begin sharp correction and that may force politicians to take some steps.

U.S. Stocks in Review

Bassett Furniture Industries, Inc (BSET) declined 10.5% or $1.69 to $14.35 after the home furnishing company said revenue in the third-quarter ending in August jumped 20% to $77.2 million. Net income in the quarter tumbled 76.8% to $556,000 or 5 cents a diluted share compared to $2.4 million or 21 cents.

Wholesale sales increased 18% to $52.9 million and net sales in retail segment jumped 12% to $46.2 million compared to the prior year.

Constellation Brands, Inc (STZ) gained 37 cents to $58.63 after the wine maker reported net sales in the second-quarter ending in August climbed 109% to $1.46 billion. Net income in the quarter surged to $1.52 billion or $7.11 a diluted share compared to $124.6 million or 62 cents.

Eli Lilly (ELY) decreased 3.4% to $48.81 said achieving 2014 sales target will be “challenging” because of economic slowdown in emerging markets and weaker yen.

International Speedway Corporation (ISCA) fell 33 cents to $33.06 after the motor-sports group stated total revenue in the third-quarter ending in August fell 0.9% to $117 million. Net loss in the quarter widened to $7.9 million or 17 cents a diluted share compared to $1 million or 2 cents.

PVH Corp (PVH) increased 4% to $122.22 after the maker of designer apparel for Calvin Klein and Tommy Hilfiger said it plans to sell its G.H. Bass and Co unit to G-III Apparel Group for $50 million in cash.

/Zale Corp (ZLC) plunged 9.4% to $14.20 after the jewelry retailer said in a regulatory filing it plans to issue 11.06 million shares linked to warrants it sold in 2010.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc