US STOCKS-Wall Street rebounds after string of losses

Fri Oct 4, 2013 1:59pm EDT

* Dow, S&P 500 rebound after week of losses

* Shutdown boosts fears that debt limit decision will be drawn-out

* IPO filing shows Twitter had loss in first half of year

* Indexes: Dow up 0.5 pct, S&P up 0.6 pct, Nasdaq up 0.9 pct

By Julia Edwards

NEW YORK, Oct 4 (Reuters) - U.S. stocks rose modestly on Friday, recovering from recent losses driven by the ongoing budget stalemate in Washington.

The S&P 500 has fallen for nine of the past 12 sessions, but several stock sectors rose on Friday, led by materials, which were up 1.2 percent, and healthcare up 1 percent. Dow Chemical rose 2 percent.

The first few days of the shutdown have made investors nervous, but the losses are relatively contained. Investors say that could change if the shutdown continues, and if the estimated Oct. 17 deadline to raise the debt ceiling passes.

Investors may start to react poorly if the weekend passes without an agreement, said Joseph Quinlan, chief market strategist at U.S. Trust Private Wealth Management.

"I think the market will be in a much nastier mood next week if we still don't have a deal," Quinlan said.

The CBOE Volatility Index, a measure of investor anxiety, has been rising lately but was down nearly 5 percent to 16.73 on Friday, still at subdued levels.

Many investors fear the budget impasse will drag on until Washington lawmakers are faced with having to reach a deal to raise the debt ceiling and avoid default in less than two weeks.

Republican House Speaker John Boehner and House Majority Leader Eric Cantor reiterated a call for negotiations on Friday but did not indicate any change in their positions. House Republicans have tried unsuccessfully to use the emergency funding bill to delay the new healthcare law and attach provisions that would only fund certain government agencies.

Democrats and President Barack Obama want a simple vote on funding the federal government.

The Dow Jones industrial average was up 69.50 points, or 0.46 percent, at 15,065.98. The Standard & Poor's 500 Index was up 10.39 points, or 0.62 percent, at 1,689.05. The Nasdaq Composite Index was up 32.49 points, or 0.86 percent, at 3,806.83.

The S&P's biggest loser on Friday was struggling retailer J.C. Penney Co, which fell to a 31-year low earlier in the session, hitting $7.82 a share. The stock was down 5.8 percent to $7.92 in afternoon trading.

Potbelly Corp said late Thursday its initial public offering of 7.5 million shares had priced at $14 each. In its first day of trading, the stock more than doubled to $31.84 with more than 14 million shares changing hands.

While shutdown concerns have pressured equities over the past two weeks, the S&P 500 index has frequently found support at its 50-day moving average of 1,679.61, though it closed slightly below that level on Thursday.

Government economic reports have been delayed by the shutdown, and the September payrolls report from the Labor Department was not released Friday as scheduled.

Twitter Inc gave potential investors their first glance at its financials on Thursday when it publicly filed documents for an initial public offering. The information showed that revenue at the social networking company almost tripled in 2012, though it posted a loss in the first half of 2013.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said the shutdown would hurt growth in the last quarter of this year, while the Bank of Japan said an extended budget standoff would have a severe global impact.