U.S. Budget Negotiations Distract Investors, J.C. Penney Plunges 11%

Nichole Harper
27 Sep, 2013
New York City

Broader market indexes extended losses for the seventh day as U.S. lawmakers debate to avoid government shutdown. Market watchers are expecting politicians to strike a last minute deal but a prolonged government closure will trim economic growth. J.C. Penney plans 96 million share offering.

[R]11:30 AM New York – Broader market indexes extended losses for the seventh day as U.S. lawmakers debate to avoid government shutdown. Market watchers are expecting politicians to strike a last minute deal but a prolonged government closure will trim economic growth. J.C. Penney plans 96 million share offering. Blackberry loss widens.[/R]

U.S. stocks struggled as lawmakers debate the debt ceiling and negotiate to avert the government shutdown.

In trading, S&P 500 index declined 0.4% to 1,691 and the narrowly focused large company index Dow Jones Industrial Average fell 0.6%.

The S&P 500 index has declined in the last six of the seven sessions as investors worry that Congress may fail to approve a federal budget before the deadline next Monday.

In the third quarter the S&P 500 index has gained 5%.

The U.S. Senate is scheduled to vote today on a spending bill, only three days before federal spending authority runs out. Separately, Treasury Secretary said extraordinary measures to avoid breaching the debt ceiling is expected to be exhausted no later than October 17.

Consumer Spending in August Rises

Consumers increased spending on goods and services in August by 0.3%, the Commerce Department said today.

The increase is better than revised 0.2% gain in July and better than 0.1% estimated earlier. The spending would have been higher if government had not imposed federal furloughs that reduced wages and salaries by $7.3 billion.

Panasonic in $1.5 Billion Deal

Panasonic Corp is in advanced talks to sell its health care unit to a U.S. based private equity group
KKR & Co. for about 150 billion yen or $1.5 billion.

According to sources in New York and in Tokyo the company is planning to keep at least 15% stake in the healthcare unit and sell the rest to raise capital to bolster its struggling cash position.

World Markets

In London trading, FTSE 100 index declined 1.1% or 69.21 to 6,496 and in Frankfurt the DAX index fell 0.3% or 22.43 to 8,642.

In Paris, CAC 40 index decreased 0.3% or 11.87 to 4,175.

In Tokyo trading, Nikkei declined 0.26% to 14,760.07 and for the week the index was nearly flat.

In Asian markets, the indexes in Hong Kong and Shanghai advanced 0.4% and in Mumbai the benchmark index fell 0.8% after the Reserve Bank of India changed its reference inflation index to consumer price index. The move is likely to lead to additional increase in interest rates in the near future.

U.S. Stocks in Review

BlackBerry ((BBRY)), the maker of smartphone reported higher than expected loss in the second quarter and said it is running out of cash at a faster rate than expected.

Revenues in the quarter ending in August declined to $1.6 billion from $2.9 billion a year ago period and net loss widened to $965 million from $229 a year ago.

Net loss per share increased to $1.84 from 44 cents a share in the period a year ago.

BlackBerry said its operations generated negative cash flow of $136 million compared to a positive cash flow of $630 million in the period a year ago. The smartphone maker also reported $72 million in restructuring costs.

The company also said in a regulatory filing that it has struck a tentative deal with Fairfax Chairman Prem Watsa for $9 a share that values the company at $4.7 billion.

J.C. Penney ((JCP)) plunged 11% to $9.30 after the company launched an offering to sell 84 million shares with Goldman Sachs as the sole underwriter.

The underwriter has the option to sell additional 12.6 million shares within 30 days and company’s controller also offered his resignation.