Wall St falls on jobs data, day 2 of government shutdown

By Julia Edwards

NEW YORK (Reuters) - U.S. stocks fell on Wednesday as a partial U.S. government shutdown entered its second day and data showed private employers added fewer jobs than expected in September.

All ten S&P 500 sectors were lower, with consumer staples stocks the weakest, off 1.1 percent. Dow component Coca-Cola was one of the sector's worst performers, losing 1.4 percent.

The federal government, except for essential services, came to a halt on Tuesday after the Senate blocked a Republican-backed bill from the House of Representatives that would fund government agencies if the implementation of President Barack Obama's healthcare law was delayed.

Despite a market bounce back on Tuesday, the political wrangling in Washington has raised investor concerns that the shutdown could be prolonged and sap Americans' confidence as well as hurt economic growth.

"Yesterday, I think the market was just relieved that the government shut down yet the sun still came up," said Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco. "The second morning we're now realizing the dysfunction in (Washington,) D.C. is going to be continuing for a while."

Payrolls processor ADP said U.S. private employers added 166,000 jobs in September, below expectations for 180,000 jobs. Investors were looking to this report for more guidance because Friday's broader, government payrolls report will be delayed if no deal on the budget is reached by then.

The Dow Jones industrial average was down 93.63 points, or 0.62 percent, at 15,098.07. The Standard & Poor's 500 Index was down 7.84 points, or 0.46 percent, at 1,687.16. The Nasdaq Composite Index was down 12.38 points, or 0.32 percent, at 3,805.61.

Monsanto Co reported a fourth-quarter loss that was wider than expected, and offered a lower outlook for 2014 even as it said it was positioned for strong growth next year. Shares fell 2.7 percent to $102.21.

Despite the recent declines, buyers have come in as the S&P approached its 50-day moving average of 1,679.78. The moving average represents a measure of the near-term trend in the market and often investors will buy in clusters at such levels.

Market participants are watching the situation for an indication of how an impending debate on the debt ceiling might play out. Strategists are starting to see a greater likelihood that the budget resolution becomes intertwined with the debt limit issue. Without raising the debt ceiling, an unprecedented debt default by the United States could result, which would roil markets.

"More than likely the budget resolution issues are going to bleed over into the debt ceiling issues," Davidson said.

The shutdown's impact on economic growth and market volatility will likely increase the longer it continues.

Equity volatility has been on the rise, with the CBOE Volatility index gaining more than 25 percent over the past two weeks. On Wednesday the VIX was up 5 percent to 16.25, still considered a low level.

Wall Street has managed to avoid steep declines during U.S. government shutdowns in the past. During a shutdown from late 1995 to early 1996, the S&P 500 added 0.1 percent. During the November 13 to November 19, 1995, shutdown, the benchmark index rose 1.3 percent.

(Editing by Bernadette Baum and Kenneth Barry)