US shares have been deeply in the red for most of the day, dragged down by concerns that the government shutdown may turn into a prolonged affair. Stocks bounced off their lows mid-afternoon in New York, with the Dow reclaiming the ground above 15,000, after reports that House Speaker John Boehner had said he would not let the a federal default occur.
The New York Times reports anonymous Representatives stating that Mr Boehner has suggested he would be willing to risk the ire of conservative Republicans to achieve a debt-limit increase via Democrat and moderate-Republican votes, breaking the so-called ‘Hastert Rule’, an informal agreement that the Republican House Speaker will not bring a bill to the floor unless it has majority Republican support. Mr Boehner’s spokesperson said, ‘The speaker has always been clear that a default would be disastrous for our economy.’
As we have seen in the past, protracted negotiations that heighten the uncertainty over whether the US will fulfil its debts is damaging to both the US and the global economy. The current posture of Congress, that threatens to delay raising the debt ceiling until the last possible moment is therefore the last thing the economy or the financial markets need. As US Treasury Secretrary Jacob Lew describes it: ‘a self-inflicted wound harming families and businesses.’
Despite the fillip from the reports of Mr Boehner’s intentions, stock indices subsequently moved southward again, following news of gunshots being fired outside the Capitol building in Washington. The complex was briefly put under lockdown while the Senate and the House were in session.
Towards the end of the New York trading session, the Dow was off by 117 points or 0.78% at 15,015.