NEW YORK – The stock market’s slow bleed got a little worse Tuesday.
The decline is the result of squabbling in Washington over raising the nation’s debt limit and a government shutdown that has dragged on for more than a week. Moderate losses for the stock market in the first days of the shutdown have accelerated this week as the U.S. has moved closer to an Oct. 17 deadline for lifting the government’s borrowing authority.
Stocks opened flat, moved steadily lower and slumped in the final minutes of trading Tuesday. The loss added to a three-week decline that has knocked the Standard & Poor’s 500 index down 4 percent since hitting a record high on Sept. 18.
Swings in the market will likely increase the closer the U.S. gets to the debt deadline without a resolution, said Randy Frederick, Managing Director of Active Trading and Derivatives at the Schwab Center for Financial Research.
“Virtually everyone expects that there will some sort of a resolution,” Frederick said. “But I wouldn’t be surprised if it only came right before the last minute.”
The S&P 500 index dropped 20.67 points, or 1.2 percent, to 1,655.45. It was the biggest one-day drop for the index since Aug. 20.
The Dow Jones industrial average fell 159.71 points, or 1.1 percent, to 14,776.53. The Nasdaq composite dropped 75.54 points, or 2 percent, to 3,694.83.
Nervous investors also dumped short-term government debt as they worried that the standoff in Washington could jeopardize the nation’s ability to pay its bills, including interest on its debt, as early as next week if Congress doesn’t raise the borrowing limit.
The yield on Treasury bills maturing in one month soared to 0.28 percent, hitting its highest level since the 2008 financial crisis. The yield was 0.15 percent on Monday and close to zero at the beginning of October.
The yield, which rises as the price of the notes fall, has surged as managers of money-market funds become more wary of holding short-term government debt that matures shortly after the debt deadline.
“Unfortunately, we’re just held hostage by what’s going on in Washington,” said Dan Veru, Chief Investment Officer of Palisade Capital Management.
The dollar fell against the euro and rose against the Japanese yen.
Among stocks making big moves:
• Jamba plunged $2.53, or 18.8 percent, to $10.94 after the company cut its fiscal 2013 guidance, saying reduced spending by consumers hurt its sales in the third quarter.
• Xerox fell 26 cents, or 2.5 percent, to $10.14 after the company said the Securities and Exchange Commission is investigating accounting practices at one of its units.
• McKesson rose $4.09, or 3.2 percent, to $133.72 after The Wall Street Journal reported that the health services company was in talks to acquire its German rival Celesio for about $5.1 billion.