Wall St gains despite US shutdown

United States stocks shrug off concerns over the impact of government shutdown on markets to close higher.

United States stocks rose despite the first US government shutdown in 17 years, as investors looked on to Washington for signs of political compromise.

The Dow Jones Industrial Average rose 62.03 points, or 0.4%, to close at 15191.70. The S&P 500 tacked on 13.45 points, or 0.8%, to 1695.00, and the Nasdaq Composite Index rose 46.50 points, or 1.2%, to 3817.98, to close at a 13-year high.

Stocks advanced even as lawmakers failed to reach an agreement to keep the government fully funded to start the new fiscal year. Widespread anticipation of political gridlock cushioned its blow in the financial markets, traders said. Prior to Tuesday, the Dow had fallen in seven of the past eight sessions, including a 129-point slide on Monday.

Other investors said the market has been desensitized by a series of last-minute budget deals in recent years, all of which were followed by stock gains.

"It's not total, freeze-up panic," said James Paulsen, chief investment strategist at Wells Capital Management, which oversees $340 billion. "The market is dealing with this in a calm fashion."

Tuesday's gains were broad, with health care and technology stocks leading all 10 of the S&P 500's sector groups higher. Shares of smaller companies continued to soar, with the Russell 2000 Index rising 1.3% to end at a fresh all-time high.

Senate Democrats and House Republicans remained at loggerheads over government spending and the launch of the Affordable Care Act. The tension showed few signs of easing Tuesday, with President Barack Obama placing blame for the shutdown on certain House Republicans' "ideological crusade" in remarks in the Rose Garden of the White House.

Uncertainty over what the shutdown might mean for the economy, combined with worries about protracted political dysfunction ahead of talks to raise the debt ceiling later this month, give some traders pause. Lawrence McDonald, chief US strategist at Newedge, said to expect more volatility in the markets should the shutdown drag on, or threaten resolution on the debt limit.

"We're not going to have a smooth run into any deal" in the absence of resolution, said Mr. McDonald. "There's going to be big up days and down days because of what's at stake."

Apple rose 2.4% after billionaire investor Carl Icahn tweeted Tuesday morning about his dinner with Apple chief executive Tim Cook at which Mr. Icahn said he "pushed hard" for the tech giant to buy back stock.

Merck was the biggest gainer on the Dow, climbing 2.4%, after the pharmaceutical company unveiled cost-cutting measures that include roughly 8,500 additional layoffs. The company aims to save about $2.5 billion a year by the end of 2015.

Stocks moved to session highs after US manufacturing activity in September unexpectedly picked up, according to data released by the Institute for Supply Management. The ISM's manufacturing purchasing managers' index stood at its highest reading so far this year.

But the Commerce Department did not release Tuesday morning's scheduled report on construction spending, the first economic data to be affected by the government's partial shutdown.

The US dollar slid against major currencies amid worries that the partial shutdown of the federal government could become a larger drag on the country's economy. October gold futures fell 3.1% to settle at $1,286.00 a troy ounce. The yield on the 10-year Treasury note rose to 2.650% from 2.614% late Monday. November crude-oil futures fell 0.3% to settle at $102.04 a barrel.

European markets were mostly higher. The Stoxx Europe 600 rose 0.8%, as data showing mild economic improvement offset uncertainty surrounding the US government shutdown.

Asian markets were little changed. Japan's Nikkei Stock Average rose 0.2% after the Bank of Japan's tankan survey showed business sentiment improved for a third-straight quarter, with the key diffusion index rising more than expected.

As global stocks held up despite the first US government shutdown since 1996, United States Treasury prices declined.

In other corporate news, Walgreen rose 4.5% after the drugstore chain reported fiscal fourth-quarter earnings that rose in line with expectations, helped by strength in its pharmacy business and gains in retail market share.

Ford Motor gained 1.9% after the auto maker reported sales rose 6% in September, led by demand for its F-series pickup trucks. General Motors fell 0.2% after reporting that its US sales fell 11%.

Amazon.com edged up 2.7% after the online retailing giant said it planned to hire 70,000 seasonal workers for its US warehouses, a 40% increase over last year, given upbeat expectations for the holiday shopping season.

Diamond Foods slumped 9.7% after the company reported its quarterly loss widened, in part because of litigation-settlement-related expenses. The snack-and-nut company's sales were hurt by lower nut sales.

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