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Stocks Dive as Government Shutdown Nears; Financial Shares Decline


Turmoil in Italy isn't helping.

As a government shutdown approaches, stocks are heading lower this morning. Poor data from China and political turmoil in Italy aren't helping.

Political theater will be in focus today, as the only data on the economic calendar is Chicago PMI, which is projected to rise to 54.4 from 53 in September, demonstrating more robust growth in the Midwest, and the Dallas Fed Manufacturing Survey, which is likely to increase by one point to 6.

Before the opening bell, Dow (INDEXDJX:.DJI) futures were down 0.81% at 15,072. Futures on the S&P 500 (INDEXSP:.INX) fell 0.84% to 1,672.20 and Nasdaq (INDEXNASDAQ:.IXIC) futures declined by 0.73% to 3,199.50. Oil prices were also sharply down. WTI futures declined 1.43% to $101.40/barrel.

The GOP-led House voted to tie federal funding to a one-year delay of the Affordable Care Act and the repeal of a tax on medical devices, making a midnight government shutdown all but inevitable since Senate Democrats refuse to allow that. If Congress fails to pass at least a stopgap measure, 800,000 federal workers might be furloughed. National parks, IRS call centers, museums, and passport renewal could be put on hold. If the matter is unresolved before Oct. 17, the government will no longer be able to pay its bills.

This morning, financial shares fell as investors brace for the damage such a shutdown would have on the economy. Bank of America (NYSE:BAC) fell 1.22% and JPMorgan Chase (NYSE:JPM) fell 1.32% in the pre-market.

JC Penney (NYSE:JCP) dropped another 2.5% in early trading after losing over 30% over last week.

Active Network (NYSE:ACTV), a company that provides cloud computing software, jumped 26% on news that it will be taken private for $1.05 billion.

Europe was also rocked on Monday after cabinet members in Silvio Berlusconi's party resigned. This raised fears that the fragile coalition would end, making snap elections likely. Prime Minister Enrico Letta called for a vote of confidence on Wednesday. German retail sales rose 0.5% in August after declining by 0-.2% in July and eurozone inflation slowed to an annualized 1.1%, down from 1.3% in August.

China's manufacturing growth slowed in September. The final reading of Markit's HSBC manufacturing PMI rose to 50.2 from 50.1 in August. This missed the earlier flash estimate of 51.2.

Twitter: @vincent_trivett
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