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Markets rise even as U.S. government shutdown begins
Question of the Day
NEW YORK (AP) — Investors stayed calm on the first day of a partial shutdown of the U.S. government Tuesday and sent the stock market modestly higher.
A long-running dispute in Washington over President Obama’s health care law caused a deadlock over the U.S. budget, forcing about 800,000 federal workers off the job and suspending all but essential services. With the Republican-controlled House of Representatives and Democratic-controlled Senate at a stalemate, it was unclear how long a temporary bill needed to finance government activities would be stalled.
Despite the political wrangling, investors didn’t push the panic button. That suggests that, at least for now, they aren’t anticipating that the stalemate would cause enough disruption in the economy to threaten a gradual U.S. recovery and a four-year bull run in the stock market.
“The trend of the economy appears to be in a positive direction,” said Michael Sheldon, chief market strategist at RDM Financial Group. “Unless this really gets ugly, we think the markets should start to look ahead to what we believe should be better economic data over the next six to 12 months.”
In the latest encouraging news on the economy, a private industry group reported Tuesday that U.S. manufacturing expanded last month at the fastest pace since April 2011 on stronger production and hiring.
The Dow Jones industrial average was up 62 points, or 0.4 percent, to 15,191 as of 12:42 p.m. EDT. The S&P 500 index gained 13 points, or 0.8 percent, to 1,694. The Nasdaq composite rose 39 points, or 1.1 percent, to 3,805.
The gains were led by health care and technology stocks.
Tech stocks were given a boost by Apple. The company’s stock rose $10.87, or 2.3 percent, after billionaire investor Carl Icahn told CNBC about his dinner meeting with Apple CEO Tim Cook. Mr. Icahn, who said he has invested $2 billion in the company, is pushing for Apple to spend $150 billion buying back its own stock.
“I feel very strongly that this should be done,” Mr. Icahn told CNBC. “It’s a no-brainer.”
The Standard & Poor’s 500 index climbed to a record Sept. 18 after the Federal Reserve surprised investors and said that it would continue with its economic stimulus. The index has shed 2 percent since then, falling on seven out of eight days before the shutdown.
“We’re not jumping in with both feet, but we’re selectively putting money to work,” said Joseph Quinlan, chief market strategist for U.S. Trust Bank of America Private Wealth Management. “On the other side of the government shutdown, you’ve got continued support from the Fed and a global economy that’s rebounding.”
Many investors still don’t foresee the budget fight spilling over into a dispute about raising the nation’s borrowing limit. Treasury Secretary Jack Lew said last week that the government would run out of borrowing authority by roughly Oct. 17.
The last time the borrowing limit issue came up, in August 2011, it led to Standard & Poor’s downgrading the United States’ credit rating. The Dow went through nearly three weeks of triple-digits moves almost daily.
In government bond trading, the yield on the 10-year note rose to 2.65 percent from 2.61 percent late Monday.
The price of oil fell $1, or 1 percent, to $101.32 a barrel. Gold fell $39, or 3 percent, to $1,287 an ounce.
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