Stocks bounce as government closes


Stocks are rebounding today as investors bet that politicians in Washington will quickly end a budget stalemate that has closed the government.

S&P 500 futures rose about one-quarter of a percent, matching gains of a similar magnitude in Europe. Asian markets also climbed. Higher-beta countries, such as Thailand, Italy and Spain, led the advances on both continents, reflecting risk appetite by investors.

The S&P 500 was down 1 percent at its lows yesterday before rebounding to close above its 50-day moving average. The mix of price action was also mostly bullish, with transports and small-caps outperforming their larger and more stable peers.

Today marks the first time in 17 years that the federal government has shut down because lawmakers failed to agree on a budget. House Republicans want to use the occasion to delay the Obamacare health-care overhaul, a move rejected by the Democrat-controlled Senate and White House. Politicians also need to raise the nation's debt ceiling by the middle of October. It will likely hurt investor sentiment if both issues remain deadlocked for long.

In addition to politics, this week is full of economic data. Today brings the Institute for Supply Management's key manufacturing survey at 10 a.m. ET, along with construction spending at the same time. Attention shifts to employment tomorrow, with the ADP private-sector payrolls report. Non-farm payrolls, often the most important release of the month, comes Friday morning. (See our calendar story )

Trading is mixed in foreign-exchange and commodity markets. The euro is inching higher against the U.S. dollar, but the Japanese yen is up against both currencies--often a sign of caution. Copper, which also follows sentiment toward the global economy, is also down almost 1 percent. Precious metals are posting smaller declines and oil is little changed. Agricultural foodstuffs are mostly negative.

In company-specific news, Walgreen is up more than 1 percent after fourth-quarter earnings beat estimates. Diamond Foods fell 8 percent in extended hours last night after predicting "significant sales and contribution headwinds" in the current quarter but hasn't traded yet this morning.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

Referenced Stocks: SPX



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