Belfast Telegraph

US markets rise as shutdown starts

Investors stayed calm on the first day of a partial shutdown of the US government and sent the stock market modestly higher.

A long-running dispute in Washington over President Barack Obama's health care law caused a deadlock over the US 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 locked in a stalemate, it was unclear how long a temporary bill needed to finance government activities would be stalled.

Despite the political clash, investors didn't push the panic button. That suggests that, at least for now, they aren't anticipating that the stalemate will cause enough disruption in the economy to threaten a gradual US 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 on Tuesday that US manufacturing expanded at the fastest pace since April 2011 last month on stronger production and hiring.

The Dow Jones industrial average rose 62.03 points, or 0.4%, to 15,191.70. The Standard & Poor's 500 index gained 13.45 points, or 0.8%, to 1,695.00. The Nasdaq composite rose 46.50 points, or 1.2% , to 3,817.98.

All ten sectors of the S&P 500 rose, led by gains in health care and technology.

Merck helped lift the health care sector. The drugmaker's stock rose 1.13 dollars, or 2.4 %, to 48.74 dollars after it announced plans to cut another 8,500 jobs as part of a plan to reduce its annual costs by about 2.5 billion dollars by the end of 2015.

The technology sector was given a boost by Apple, which gained 11.21 dollars, or 2.4 %, to 487.90 dollars, after billionaire investor Carl Icahn tweeted about his dinner meeting with Apple's CEO Tim Cook. Icahn, who said he has invested two billion dollars in Apple, is pushing for the company to spend 150 billion dollars buying its own stock.

"I feel very strongly that this should be done," Icahn told CNBC in an interview. "It's a no-brainer."

The Apple board pledged in April to spend 60 billion dollars buying back its stock through the end of 2015. About 18 billion dollars of that commitment had been exhausted through June.

The S&P 500 index has fallen 2% since climbing to a record on September 18, when the Federal Reserve surprised investors by saying it would continue with its economic stimulus. The index has fallen seven out of eight days leading up to the partial government shutdown.

"We're not jumping in with both feet but we're selectively putting money to work," said Joseph Quinlan, chief market strategist for US 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 predict that the budget fight will be resolved before it spills 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 October 17.

The last time the borrowing limit, or debt ceiling, issue came up in August 2011, it led to a downgrade of the United States' credit rating by Standard & Poor's. The Dow went through nearly three weeks of triple-digits moves almost daily shortly thereafter.

"To some extent investors are conditioned to a certain amount of drama and if we can get the drama behind us quickly it won't be a big deal," said Dean Junkans, Chief Investment Officer for Wells Fargo Private Bank. "If this goes beyond the middle of next week, the market will get increasingly more worried about the debt ceiling."

In government bond trading, the yield on the 10-year note rose to 2.65% from 2.61% late on Monday.

The price of oil fell 29 cents, or 0.3%, to 102.04 dollars a barrel. Gold fell 40.90 dollars, or 3 %, to settle at 1,286.10 dollars an ounce.

The dollar fell against the euro and the Japanese yen.

Among other stocks making big moves:

- Walgreen rose 2.44 dollars, or 4.5 %, to 56.24 dollars after the drugstore chain said its fiscal fourth-quarter earnings soared 86% after it booked gains from its method of inventory accounting and its acquisition of a stake in European health and beauty retailer Alliance Boots.

- Ford gained 32 cents, or 1.9%, to 17.19 dollars after the vehicle maker said that US sales rose 6 % in September, with strong car sales making up for slower sales of SUVs.