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Specialist Frank Masiello watches a television monitor on the floor of the New York Stock Exchange showing a Washington news conference by House Speaker John Boehner AP Photo/Richard Drew

Markets wobble as US debt talks falter

Fitch has placed the US credit rating on a Negative Watch, as the stock market fell today.

THE US STOCK market was whipsawed today as the on-again, off-again talk of a debt deal in Washington made investors wonder just how pessimistic they should be.

Stocks were flat or down all day, but the size of the losses waxed and waned depending on which politician was giving a press conference. The market closed with its first loss in a week, with the Dow Jones industrials down 133 points. Yields on short-term government debt rose sharply as investors worried about the possibility of a default.

Indexes were down only slightly early today, when Republican and Democratic leaders in the Senate reported that a deal over increasing the nation’s borrowing limit appeared to be getting closer.

But after House Republicans came up with their own competing plan later in the day, and it was rejected by Democrats, stocks fell further.

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The stakes are high and the deadline is getting nearer.

Unless the borrowing limit is raised, the U.S. will bump up against a Thursday deadline after which it can no longer borrow money to pay its bills, which could lead to a default on government debt. That possibility has rattled markets all month.

It was clear that traders were hanging on every word out of Washington. The losses on the Dow shrank by about 40 points during a short press conference by House Speaker John Boehner shortly before noon Eastern.

Another reason for Wall Street’s pessimism is that any deal reached this week might simply set up another showdown a few months down the road.

The Dow Jones industrial average fell 133.25 points, or 0.9 per cent, to 15,168.01. The Standard & Poor’s 500 index fell 12.08 points, or 0.7 per cent, to 1,698.06. The Nasdaq composite fell 21.26 points, or 0.6 per cent, to 3,794.01.

Read: Senate leaders optimistic on US debt ceiling deal

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18 Comments
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    Mute Niall
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    Oct 15th 2013, 10:54 PM

    People should be more worried about this than the budget

    48
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    Mute Jim Flavin
    Favourite Jim Flavin
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    Oct 15th 2013, 10:25 PM

    Unless the borrowing limit is raised, the U.S. will bump up against a Thursday deadline ”
    – raising the borrowing limit is Defaulting . Why are the rating agencies not hitting the US for this – which they have done before , yet are all too willing to hit EU countries . Is it just part of the currency wars to save the $ .

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    Mute John Mcloughlin
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    Oct 15th 2013, 10:47 PM

    Different strokes for different folks as usual. Can’t downgrade the mighty dollar. Oh! No!

    22
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    Mute Nelly
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    Oct 15th 2013, 11:01 PM

    If they don’t raise it we are fu(ked

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    Mute Neil Murphy
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    Oct 15th 2013, 11:16 PM

    The media is wrong on this. On Thursday, if the debt limit is not increased the US will not default. It will simply stop being allowed to borrow further money. So long as they continue servicing current debt with tax receipts (paying the interest), they won’t default. However they would have to cut left right and center – it would be an actual govt shutdown so much would be unfunded. But no default.

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    Mute Podge
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    Oct 15th 2013, 11:33 PM

    The US has been living beyond its means for a generation now and the music is about to stop. The only sustainable solution is a deal with the Chinese. The deal would involve floating the Yuan at real trade weighted rates but the Chinese are playing the long game. They think and plan in centuries, not electoral cycles, so they can live with a decade or two of turbulence because they know that when the dust settles the Yuan would be the worlds reserve currency and the balance of power will have shifted in their favour. They, like the US in the 50′s and 60′s, will then be able to afford “foreign adventures” to suit their own agenda and a disproportionate share of the planets resources.

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    Mute Marilyn Maroney
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    Oct 16th 2013, 1:00 AM

    Sounds like my gov’t is like yours…….screwed

    4
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    Mute mary jones
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    Oct 16th 2013, 8:06 AM

    Can somebody explain to me, in simple language please, why we can’t have the euro as our base currency? As this is a legitimate question I would request the smart ars3 commenters to keep it to themselves in this instance. Alternately, any links to articles that can explain why the US $ is the reserve currency of choice, and or how we could possibly change that situation would be appreciated. A lot of people seem to comment but sometimes I wonder about how clearly the whole picture is understood? Thanks in advance.

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    Mute Kieran Doyle
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    Oct 16th 2013, 8:40 AM

    http://www.investopedia.com/terms/b/basecurrency.asp
    For accounting purposes, a firm may use the base currency to represent all profits and losses. … the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. … Investors can trade almost any currency in the world.
    Or try
    Currency pair – Wikipedia, the free encyclopedia
    en.wikipedia.org/wiki/Currency_pair
    The most traded currency pairs in the world are called the Majors. They involve the currencies euro, US dollar, Japanese yen, pound sterling, Australian dollar, …

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    Mute Kieran Doyle
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    Oct 16th 2013, 8:46 AM

    Essentially 85% of currency trades are done globally based on the us$. 39% the € and 12.9% the £. The question then is why does this exceed 100% and the answer lies in buying and selling in pairs. Also the large commodities are traded in $ oil gold etc. does this help. Also look at http://www.thrivemovement.com that will scare the proverbial out of you. The Chinese yuan will be the long term base currency. Give it a few decades.

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    Mute mary jones
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    Oct 16th 2013, 10:57 AM

    @Kieran much appreciated, thank you! I’m off to make coffee and read!

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    Mute Jim Flavin
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    Oct 16th 2013, 12:50 PM

    Can somebody explain to me, in simple language please, why we can’t have the euro as our base currency?
    – do u want to end up like Sadam and Gadhafi .

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    Mute mary jones
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    Oct 16th 2013, 6:28 PM

    @Jim do you know what you are talking about? Because if you do please explain. I don’t see what’s wrong with asking a genuine question. At least I’m not pretending that I understand what the hell I’m talking about in order to sound smart. Suggest you try it sometime.

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    Mute mary jones
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    Oct 16th 2013, 6:35 PM

    @ Kieran I get the relative value thing but I don’t understand why crazy politicians in the US will affect me here. I’m not stupid, I do understand balance of trade and I get that everything is pretty much traded in USD i just want someone to explain to me why this is? When it happened? And if its possible for it to change so that the rest of the world doesn’t have to hold its breath every time the lunatics take over the asylum in the American congress? We have enough problems. And why does everyone just assume when the globe does shift to a new world base currency, why it’s going to new the yuan? Now, if there are some kind and knowledgable people out there who could please point me in a direction to find this info I would be very grateful because I’m at a loss as to where to begin my google search. Cheers!

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    Mute Stephen McMahon
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    Oct 16th 2013, 4:16 AM

    This has the potential to make the budget irrelevant. If this goes badly we have worldwide recession.

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    Mute Ollie Owens
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    Oct 16th 2013, 9:08 AM

    looks like the biggest problems started with George Bush JNr

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