* U.S. government shutdown could hurt markets if prolonged
* Apple shares jump on Icahn dinner with CEO Cook
* Indexes up: Dow 0.4 pct, S&P 0.7 pct, Nasdaq 0.9 pct
By Angela Moon
NEW YORK, Oct 1 U.S. stocks started off a new
month and a new quarter with gains on Tuesday as investors
appeared confident that the first partial government shutdown in
nearly two decades would be short-lived.
Trading volume was modest, with just about 3.9 billion
shares traded with less than two hours to go in the session. The
daily average volume has been around 6.3 billion shares this
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 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.
"This time around, the markets have been so blissfully
unconcerned that this hasn't been a problem. It could start to
bite now, of course. But for me, the main story is the number of
people not receiving paychecks or producing output," said Eric
Lascelles, chief economist at RBC Global Asset Management in
Lascelles said he estimates that each week the shutdown
persists will shave about 0.1 percentage point from
"It's a material hit but certainly one that can be absorbed.
The question will be whether it lasts longer than the market
expects and starts to bleed into confidence."
The Dow Jones industrial average was up 52.85 points,
or 0.35 percent, at 15,182.52. The Standard & Poor's 500 Index
was up 11.05 points, or 0.66 percent, at 1,692.60. The
Nasdaq Composite Index was up 35.65 points, or 0.95
percent, at 3,807.13.
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.
But with the closure of federal government agencies, the
release of a report on construction spending in August, which
had been scheduled for 10 a.m, was delayed. If no deal is
reached by Friday, the closely watched payroll report will also
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.
Supporting the Nasdaq, shares of Apple Inc rose 2.3
percent to $487.64 on news that billionaire activist investor
Carl Icahn had dinner with Apple chief executive Tim Cook on
Monday and "pushed hard" for a share buyback.
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, 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.
U.S. stocks 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
Historically, Wall Street has managed to avoid steep
downside during similar incidents. During the federal government
shutdown from Dec. 15, 1995 to Jan. 6, 1996, the S&P 500 added
0.1 percent. During the Nov. 13 to Nov. 19, 1995, shutdown, the
benchmark index rose 1.3 percent.
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.