US STOCKS-Futures higher, but investors still wary about shutdown

Tue Oct 1, 2013 8:17am EDT

* U.S. government shutdown could hurt markets if prolonged

* Wall Street coming off strong gains in September, third quarter

* Berkshire to get nearly $2.15 billion in Goldman stock

* Futures up: Dow 39 pts, S&P 5 pts, Nasdaq 8.5 pts

By Ryan Vlastelica

NEW YORK, Oct 1 (Reuters) - U.S. stock index futures were higher on Tuesday, indicating a positive start to the fourth quarter, though concerns remained following a partial shutdown of the U.S. government.

Congress missed a midnight deadline to agree on a spending bill, resulting in up to 1 million workers being put on unpaid leave. The release of the government's report on construction spending in August, which had been scheduled for 10 a.m, has been delayed.

"People expect this will be relatively short-term, with the impact hopefully minimal, but the longer it goes on, the more pressure Washington will face," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York. "If this lasts longer than a few days, you'll really start to see volatility pick up."

Markets had maintained some hope that a shutdown could be avoided, and shares plummeted on Monday as the deadline approached without any stalemate being broken. However, some market participants viewed any pullback as a buying opportunity, and Monday's early losses were trimmed.

While an extended shutdown could weigh on economic growth and consumer confidence, a quick resolution may have limited impact. In addition, a resolution here could ease tensions for the congressional debate over the debt ceiling in mid-October. That issue, which could result in a default on U.S. debt if not resolved, is considered more serious for markets.

"It was expected that the debt ceiling is when Republicans would circle their wagons; it is preferable that the budget battle be done now rather than there being a showdown over that," said Pavlik.

S&P 500 futures rose 5 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 39 points and Nasdaq 100 futures rose 8.5 points.

While the S&P 500 traded under its 50-day moving average for much of Monday's session, it recovered some of its losses late in the day and closed above the level, suggesting some near-term support.

Equities have been strong performers recently, with major indexes climbing more than 2 percent in September. In the third quarter, the S&P rose 4.7 percent and the Nasdaq soared 10.8 percent in its biggest quarterly gain since the first quarter of 2012.

Walgreen Co reported fourth-quarter earnings that beat expectations, helped by a rise in generic drug sales.

Warren Buffett's Berkshire Hathaway Inc will receive Goldman Sachs Inc stock worth nearly $2.15 billion on Tuesday through warrants acquired as part of a deal originally signed during the depths of the 2008 financial crisis.

Cooper Tire and Rubber Co shareholders have approved the U.S. company's $2.5 billion sale to India's Apollo Tyres Ltd , clearing a major step for the creation of the world's seventh biggest tyre maker.

Overseas, tensions eased in Italy as dissent from within his People of Freedom Party complicated Silvio Berlusconi's plans to bring down the coalition government of Prime Minister Enrico Letta. Data showing European factory activity grew for the third month in September also lent support to equities.

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