The third political showdown over U.S. government finances in little more than two years eroded consumer confidence, drew a warning from President Barack Obama about the threat to the economy, and dented the government’s global reputation.
With the deadline for avoiding a U.S. default looming, investors from Boston to Bangalore are moving to cash, extending the maturities of their short-term Treasury holdings and buying options to help protect themselves should stock and bond prices tumble.
U.S. companies, which have almost doubled profits since the financial crisis, are losing the benefit of record-low debt expenses as Federal Reserve plans to taper bond purchases send borrowing costs higher.
Vice Chairman Janet Yellen says the end of the Federal Reserve’s so-called Operation Twist won’t amount to a tightening of monetary policy. Whether investors agree may help determine the central bank’s next steps.
U.S. companies such as AT&T Inc. and Johnson & Johnson are paying less tax than before the recession even as profits have rebounded, buoyed by breaks and expansion in overseas markets, where the tax burden is lower.