US stocks fell as US government closes

Globally, stocks fell the most in a month, trimming the biggest quarterly advance since the start of 2012, amid U.S. government shutdown. Standard and Poors 500 index retreated to levels of early September.

The MSCI All Country World Index lost 0.8% as of 4 p.m. in New York as the Standard & Poor’s 500 Index slipped 0.6% to 1,681.55, paring an earlier 1% drop. The yield on 10-year U.S. Treasury notes was down one basis point at 2.61% after losing four basis points earlier. Oil also retreated.

The first partial government shutdown in 17 years is already into play without any signs of averting widespread furloughs of government workers. Italy’s government is on the verge of collapse after allies of former leader Silvio Berlusconi said they would quit the cabinet. China’s manufacturing rose less than economists estimated in September.

“We are at the mercy of whatever develops in Washington,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in an interview, cited by Bloomberg. “An attempt to prevent a shutdown is not totally unexpected, but some agreement will be better than none.”

Failure to approve funding to keep the government open and to raise the debt ceiling would have a destabilizing effect on the economy, President Barack Obama said in a televised statement on Sept. 27. Closing the government may cut fourth-quarter economic growth by as much as 1.4% points depending on its length, according to economists from Moody’s Analytics Inc. to Economic Outlook Group LLC.

In corporate news, Procter & Gamble Co., United Technologies Corp. and Nike Inc. lost at least 1.4% to lead declines in 28 of 30 stocks in the Dow Jones Industrial Average. All 10 of the main industry groups in the S&P 500 fell, led by consumer-staples and energy companies.

Italy’s FTSE MIB Index slid 1.2% as Mediaset SpA and Unione di Banche Italiane lost more than 4%. Telecom Italia SpA added 5.2% as a person with knowledge of the matter said Chief Executive Officer Franco Bernabe plans to resign this week.