* U.S. government shutdown could hurt markets if prolonged
* Apple shares jump on Icahn dinner with CEO Cook
* U.S. seeks delay in trial on U.S. air, AMR deal due to
* 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 4.4 billion
shares traded with less than an hour 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
The Dow Jones industrial average was up 32.80 points,
or 0.22 percent, at 15,162.47. The Standard & Poor's 500 Index
was up 9.55 points, or 0.57 percent, at 1,691.10. The
Nasdaq Composite Index was up 33.56 points, or 0.89
percent, at 3,805.04.
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.
Market expectations are that "it (shutdown) will last 4-5
days. If it goes beyond that to several weeks, then the debt
ceiling debate will be an issue," said Scott Wren, senior equity
strategist at Wells Fargo Advisors in St. Louis, Missouri.
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.
The U.S. Department of Justice, which is fighting a proposed
merger of US Airways Group Inc and American Airlines
parent AMR Corp, asked a judge on Tuesday to postpone
a trial in the case, saying the shutdown would prevent its staff
from working. Shares of US Airways were up 3.38 percent at
$19.60 while AMR rose 8.76 percent to $4.47.
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.
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
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.