Courtesy of John Nyaradi.

A stock market correction on Wednesday is likely, given that the US Government shutdown is real

I predict that US stock markets will correct tomorrow, given that investors will likely figure out that the US Government shutdown is real and here to stay, at least for the short term.  Investors certainly did not appear to believe that the shutdown actually mattered yesterday, with the S&P 500 (NYSEARCA:SPY) rising .80%, the DJIA (NYSEARCA:DIA) rising .41%, and the NASDAQ 100 (NASDAQ:QQQ) rising 1.23%.

We certainly do live in interesting times.  Yesterday’s government shutdown is the first since 1995, and over 800,000 Federal employees have been laid off because of it.  Furthermore, the government shutdown comes just in time for the dreaded debt ceiling debate which needs to be addressed by October 17th in order to avoid a US credit default.  Perhaps investors feel this shut down is short lived (most likely), perhaps they feel it isn’t a big deal (not as likely), or perhaps they think something magical will happen (not likely at all), but the feeling remains the same to me in that it does not appear that any side is ready to back down just yet, and investors will likely figure this out soon and bleed red over it.  Meanwhile, I do not think investors were thinking (or cared) about the upticks in yesterday’s CoreLogic Home Price Index Report or the ISM Report, both of which grew slightly.

The Obamacare exchanges also opened yesterday, and reports coming in from all over the country alleged that several exchanges were crashing due to too many people trying to access them.  I heard a figure on NPR driving home yesterday evening that over 1 million people across the country had already tried to sign up for exchanges by 7 PM yesterday morning, and that many more had logged on to view insurance plans without signing up.  Naturally, the Health Care Sector boomed, with the Health Care Select Sector SPDR Fund ETF (NYSEARCA:XLV) rising 1.27% yesterday.

International markets are a mixed bag of highs and lows, with the the Nikkei Index having lost over 2% at time of writing, compared with the Hang Seng Index rising to just under 1%.  European markets followed US markets yesterday with epic gains.

Futures markets however are all in the deep red at the time of this writing, perhaps suggesting that investors are actually starting to digest the reality of the shutdown.

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