Stocks bounce back despite government shutdown
NEW YORK -- Wall Street had a muted initial reaction to the federal government’s shutdown.
Major U.S. stock indexes bounced back in early trading in New York, a day after they lost about 1% as the U.S. House, Senate and President Obama dug in for yet another seemingly intractable Washington fight.
The Dow Jones industrial average gained 62.82 points, or 0.42%, to 15,192.49 about an hour after the opening bell.
The broader Standard & Poor’s 500 rose 10.91 points, or 0.65%, to 1,692.46. The technology-focused Nasdaq composite index was up 28.77 points, or 0.76%, to 3,800.25.
“In a word, the market is complacent with what’s going on in Washington,” said Phil Orlando, chief equity strategist at the asset management firm Federated Investors in New York.
Investors did have some economic data early Tuesday: The Institute for Supply Management said manufacturing activity rose for the fourth consecutive month in September, beating analysts’ expectations. Stocks rose higher after the manufacturing report was released.
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The institute’s PMI index rose to 56.2 last month, up from 55.7 in August. An index reading above 50 indicates the manufacturing sector is expanding.
Global markets also took the Washington shutdown in stride, with Asian stocks generally up slightly overnight, boosted by positive signs of an improving outlook for the Japanese economy. Most major European stock indexes were trending higher as well Tuesday.
Many on Wall Street seem to believe Congress and President Obama will strike a last-minute deal. In previous fiscal crises, stocks have dropped sharply, only to bounce back after a resolution.
“Investors still believe lawmakers will come to terms quickly,” said Mark Zandi, chief economist at Moody’s Analytics.
“Ironically, that probably won’t happen until financial markets start to sell off,” he added. “Once people start losing money, lawmakers will be under extreme pressure to settle this.”
Bond yields rose, but were still off recent highs. The yield on the benchmark 10-year Treasury rose from 2.61% on Monday to 2.64% early Tuesday.
Much of the federal government was paralyzed Tuesday morning by the first partial shutdown in 17 years.
The congressional budget battle over spending and President Obama’s healthcare overhaul set the stage for another looming fight over whether to the raise the U.S. debt limit.
The prospect that the U.S. government could default on its debts caused financial turmoil two years ago.
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