* U.S. government shutdown could hurt markets if prolonged
* Merck shares rise on announcement of job cuts
* Automakers post monthly sales results
* Indexes up: Dow 0.45 pct, S&P 0.79 pct, Nasdaq 1.03 pct
By Chuck Mikolajczak
NEW YORK, Oct 1 U.S. stocks rose on Tuesday
after limping to the end of the third quarter, but investors
appeared confident a deal could be reached in Washington to
settle 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. A bipartisan fight over President Barack Obama's
healthcare law was at the center of the political impasse.
The Democratic-led U.S. Senate on Tuesday voted to kill
Republicans' latest attempts to modify an emergency government
funding bill, stripping proposed amendments from the spending
bill and sending back to the House a "clean" bill that would
extend funding for government agencies until Nov. 15.
Shares dropped on Monday as the deadline approached without
any apparent progress in breaking the stalemate, giving the S&P
500 its seventh decline in the last eight trading days of
September. However, some market participants viewed any pullback
as a buying opportunity in the absence of an extended shutdown.
"If this (shutdown) is short like most of them have been, it
won't really change much as far as the fundamentals. Thus we are
still pretty bullish on U.S. stocks," said Mike Serio, regional
chief investment officer for Wells Fargo Private Bank in Denver,
"However, if this does go on for a long time, we may have to
go back and revisit our GDP growth number at some point."
Investors were also eyeing the tone of negotiations as a
possible template for the upcoming debate on lifting the debt
ceiling in mid-October, which could result in a default on U.S.
debt if not passed. The debt limit issue is considered to have a
bigger impact on markets.
"The more important event is going to be the debt ceiling.
If for some reason they cannot do that, then we definitely will
have to rethink our GDP number," said Serio.
The Dow Jones industrial average rose 68.06 points or
0.45 percent, to 15,197.73, the S&P 500 gained 13.33
points or 0.79 percent, to 1,694.88 and the Nasdaq Composite
added 38.734 points or 1.03 percent, to 3,810.214.
Volume was modest, with about 2.6 billion shares traded
around the halfway point of the session.
Merck & Co announced a plan to cut annual operating
costs by $2.5 billion by the end of 2015 and eliminate 8,500
jobs. Shares rose 1.2 percent to $48.77 as one of the biggest
boosts to the S&P 500.
Walgreen Co reported fourth-quarter earnings that
exceeded expectations, helped by a rise in generic drug sales.
Shares gained 4.4 percent to $55.15.
Ford Motor Co advanced 2.3 percent to $17.26 after the
company reported a 6 percent increase in its September sales.
General Motors edged up 0.1 percent to $36.02 following
its sales results.
In the latest economic data, the Institute for Supply
Management's manufacturing index came in at 56.2, up from the
previous month and above expectations for a reading of 55.
The release of the government's report on construction
spending in August, which had been scheduled for 10 a.m, was
delayed because of the shutdown. If no deal is reached by
Friday, the closely watched payroll report will also be delayed.
The report on private sector hiring in September by payrolls
processor Automatic Data Processing will be released on
Wednesday at 8:15 a.m. (1215). Weekly initial jobless claims
data due on Thursday will also be released as scheduled.