Stock market drops as investors fret over budget fight
Stock market took a hit from Washington's budget battle Friday. A showdown over federal spending sent the stock market plunging in an afternoon sell-off that wiped out all the gains from a rally earlier this week.
Washington's budget fight jolted Wall Street on Friday, reminding it that the next few weeks could bring a lot of uncertainty.
Investors hate uncertainty, and stocks plunged in afternoon sell-off that wiped out all the gains from rally earlier this week, when the Federal Reserve kept its huge economic stimulus program intact.
The vote itself wasn't a surprise, but it reminded investors that the Republican-led House and the Democratic-controlled Senate are poised for a showdown over federal spending.
The debt ceiling must be raised by Oct. 1 to avoid a government shutdown, and a potential default on payments, including debt, later in the month.
The Dow Jones industrial average dropped 185.46 points, or 1.2 percent, to close at 15,451.09 — 225 points below its all-time closing high reached Wednesday after the Fed's announcement.
All 10 industry groups in the S&P 500 fell, led lower by telecom companies and utilities. The S&P also fell on Thursday, making this its first two-day decline in almost three weeks.
Until now, September defied the worriers. The stock market has bounced backed from an August swoon, despite a calendar loaded with potential rally killers.
Summers, a former Treasury secretary, was viewed as being more likely to rein in the Fed's massive stimulus program, which has kept interest rates low and boosted corporate profits.
As Middle East strife recedes from investors' minds, though, fears of budget gridlock grow.
"Geopolitics ... is much lower on the list. It's not off the list" of investor worries, said David Darst, chief investment strategist for Morgan Stanley Wealth Management. "No. 1 becomes the debt ceiling and the federal spending debate."
In corporate news, BlackBerry plunged $1.79, or 17 percent, to $8.72 on the Nasdaq after announcing a loss of nearly $1 billion and layoffs of 4,500 workers. The company's phones have been eclipsed by phones from Apple and Samsung.
Apple fell $4.89, or 1 percent, to close at $467.40 as its newest iPhone debuted at stores.
Darden, the struggling parent of Olive Garden and Red Lobster, fell $3.52, or 7 percent, to $45.78 after posting a much lower quarterly profit and saying its president and chief operating officer will retire. Sales fell at its two flagship restaurant chains despite efforts to renew menus and advertising.
Two new stocks had strong debuts. Tech security company FireEye surged $16, or 80 percent, at end at $36, and artificial intelligence company Rocket Fuel rose $27, or 93 percent, to $56.10.
The yield on the 10-year Treasury note fell to 2.74 percent, from 2.76 percent on Thursday.