US stock markets recover losses in spite of shutdown

Wall Streeters, it seems, were happy to still have jobs


Published October 1, 2013 4:00PM (EDT)

US stock markets recovered their losses Tuesday morning even as the biggest government shutdown in close to 20 years began.

All the major US markets opened up after falling sharply Monday as it became clear Washington was at an impasse. Most of the major European and Asian markets were also rising.

The Dow Jones was up 48 points, or 0.3%, to 15,179 after the first hour of trading. The Standard & Poor's 500 rose nine points, or 0.6%, to 1,690. The Nasdaq composite rose 23 points, or 0.6%, to 3,795.

The dollar, however, took a hit — it fell 0.5% against the Japanese yen, to 97.78 yen, while the euro rose 0.1% to $1.3544.

The federal shutdown will send more than 800,000 federal workers home without pay, close national parks – and has been predicted to have a negative impact on the still insipid recovery in the housing market.

In a note to investors, Dan Greenhaus, the chief strategist at broker BTIG, said investors were more concerned over the looming row over raising the US debt ceiling than the shutdown. He said a common view "which has grown considerably in acceptance, is that the House is 'getting it out of their system' now so the eventual debt ceiling debate can be solved more easily."

Greenhaus said a short-term shutdown of one week would have little impact on growth, "but the longer this drags on, the more impactful it will be," he warned. And he added that he was "growing increasingly nervous" about the upcoming debt ceiling debate.

Bruce Bittles, the chief investment strategist at RW Baird & Co, said it was clear that investors were discounting the row and any potential clash over the debt ceiling. "We have been through this several times before. Markets reacted well yesterday, after the initial sell off there was virtually no selling in the US. The assumption is that it won't last that long and that it won't be that damaging to the markets," he said.

Bittles said the larger danger was "complacency".

"Investor complacency is widespread and deep-seated," he said.

He said the Federal Reserve's recent decision to keep up its $85bn a month quantitative easing programme may have underpinned investor confidence but that if the debt ceiling talks collapse, that confidence could be shaken and lead to a selloff.

The Associated Press contributed to this report

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