After The Close - The first trading day of October—a month that historically has been a very volatile one for investors—was a clear win for the bulls. The equity indexes started the session nicely higher and, for the most part, carried a good portion of those gains to the final bell. The Dow 30 did give up some ground late in the session, with the stocks of Wal-Mart (WMT - Free Wal-Mart Stock Report), Nike (NKE -Free Nike Stock Report), and United Technologies (UTX - Free United Technologies Stock Report) among the notable issues weighing on the index of 30 bellwether companies. Still, investors appeared to brush off the shutdown of the U.S. government, the result of the failure of Congressional leaders to hammer out a budget for the new fiscal year that began at midnight; the consensus is that the closure will be short lived. Our sense is that investors are more concerned about a deal to raise the debt limit by the fast-approaching October 17th deadline. A failure to come to agreement there would have far more dire fiscal and economic consequences for the nation.

The buying was pretty encompassing during today’s session. By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index had added 62, 47, and 13 points, respectively. Another positive sign for the bulls was the even more pronounced gains in the mid-cap area, which, along with a nice jump in small-cap stocks, was an indication that investors added more risk to their portfolios after shying away from such issues leading up to the budget deadline. Too, the S&P 500 Volatility Index (or VIX), which is a measure of anxiety in the equity market, was down modestly in the latest session.

Not surprisingly, given the aforementioned market data, which also included advancing issues finishing comfortably ahead of decliners on both the New York Stock Exchange and the NASDAQ, all of the 10 major sectors ended the session in positive territory. Leadership came from the economically sensitive groups and the healthcare stocks, with the former getting a boost from a better-than-expected report on manufacturing activity for the month of September (more below). Meantime, the healthcare stocks, particularly those of the managed care providers, got an assist from the launch of the Affordable Care Act healthcare exchanges. Investors are banking on the notion that the healthcare insurers are likely to benefit from more individuals now able to buy healthcare, many of whom will be subsidized by the government. It has already been a very good year for those long healthcare stocks.

As noted, there was another positive report issued this morning on the U.S. economy. Specifically, the Institute for Supply Management, an Arizona-based trade group, reported that its survey came in at 56.2 in September, which was more than a percentage point above expectations (55.0) and somewhat better than the 55.7 reading registered in August. It was the fastest rate for this important category in more than two years. Of particular note was the rise in the employment index, which jumped to 55.4 last month, its best reading in more than a year, and well above the 53.3 reading in August. The nation’s employment picture will play a big role in the Federal Reserve’s monetary policy decisions, which will be discussed later this month at its two-day FOMC meeting. Speaking of employment, Friday’s report on nonfarm payrolls for the month of September may well be delayed by the ongoing U.S. government shutdown.   

Looking ahead, the attention of the investment community will continue to be on Capitol Hill, where the talks between the two political parties have proven fruitless over the last fortnight. As noted above, we think the equity market’s reaction to events on Capitol Hill will remain muted until the debt-ceiling negotiations heat up. We would not be surprised if October proved to be a volatile month for equities, as investors will be faced with the aforementioned debt negotiations, the possibility of a Federal Reserve monetary policy shift, and a hefty dose of earnings reports. Third-quarter earnings season unofficially kicks off a week from today when aluminum maker Alcoa (AA) releases its latest quarterly results.   – William G. Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 


12:40 PM EDT - The U.S. stock market got off to a solid start this morning, following last night's partial government shutdown, and is currently pressing higher still. However, it remains to be seen if the bulls can maintain their buying campaign through the afternoon. At just past noon in New York, the Dow Jones Industrial Average is up 63 points; the broader S&P 500 Index is ahead 13 points; and the technology-heavy NASDAQ is tacking on 30 points, and is once again assuming a leadership role. Market breadth is highly favorable, as advancing stocks are ahead of decliners by almost three to one on the NYSE.

All of the various market sectors are firmly in positive territory, which further adds credence to today’s rally. Notably, the healthcare issues are sharply higher, thanks to large gains in the biotechnology area. Also, the technology sector is advancing sharply, helped by strength in the hardware and equipment makers. Meanwhile, the basic materials sector is lagging some of the other groups, but is still up a bit, on average.

Technically, today’s move up, puts the S&P 500 back above its 50-day moving average, located at about 1,680. This is considered a key technical level by many traders, so the support here is constructive. The VIX is headed slightly lower to about 15.65, which also likely indicates that the sentiment has turned less negative, at least for today.

Traders were likely satisfied with this morning’s economic news. Specifically, the Institute for Supply Management’s manufacturing index came in at 56.2 for the month of September, up from the 55.7 reading logged in August, and ahead of analyst expectations. Tomorrow, the employment situation will be an area of concentration, as the September ADP Employment Change report, which measures the health of the private job market, is due to be released. This report, would normally be followed by Friday's even more critical Labor Department's monthly employment survey, the release of which is now unlikely due to the aforementioned government shutdown.

It is a quiet day for corporate reports. Diamond Foods (DMND) are off sharply, as the walnut distributor issued weak guidance. -Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 


Stocks to Watch from The Survey– Corporate news is rather light this morning, but there are a few companies on the move ahead of the bell. Pharmacy chain Walgreen Co. (WAG) is down slightly in the premarket following its fiscal fourth-quarter earnings report, though results were decent. Meanwhile, shares of Merck & Co. (MRK - Free Merck Stock Report) are trading higher this morning after the New Jersey-based drugmaker and Dow-30 component announced a cost-saving initiative that it hopes will help cut as much as $2.5 billion in expenses over the next couple of years. In other news, Internet giant Google, Inc. (GOOG) has reportedly made progress in settling its European Union antitrust dispute. That stock is up slightly in early morning trading. – Kathryn M. Drew

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.


Before The Bell - A new month is beginning and the same issue that vexed investors during the final sessions of the old month is continuing--namely unsuccessful attempts to fashion a deal on a new U.S. budget. And now a new wrinkle has been added, the threatened government shutdown has become a reality, as Congress earlier today went past the midnight deadline for orchestrating such a deal. Thus, a partial government shutdown is now in effect.

Actually, the aforementioned shutdown had become all but unavoidable yesterday afternoon as the Democratic-led Senate formally rejected conditions that the Republican-led House of Representatives had attached to a temporary spending bill. Specifically, the Senate voted 54 to 46 at that time to take out a one-year delay in the President's health care law from the bill. Such a delay would, according to the bill's proponents, have allowed the government to keep on running. Once that vote was taken, all hopes for a late compromise went by the wayside. The stock market, already lower for the day, fell more sharply into the close. By the end of the trading session, the Dow Jones Industrial Average was off 129 points; the Standard and Poor's 500 Index was down 10 points; and the tech-heavy NASDAQ was likewise lower by 10 points. As has been the case recently, the NASDAQ acquitted itself much better than the other averages, on a percentage basis. 

Now, we resume life with a number of federal services not being performed. How long will this shutdown endure? That is anyone's guess, although our sense is that some compromise, even a short-term move, will be forthcoming before long. In another matter, the Congress will need to soon address a much more serious issue--that is, the need to extend the debt ceiling. How that soap opera plays out will have an even greater impact on the markets. That is because we have been through a government shutdown before, but have never had to deal with an inability to extend the debt ceiling. Such a failure would generate a default on the nation's debt, which would be unprecedented. In effect, the above budget dealings are a dress rehearsal for the debt-ceiling drama that will soon follow, as that deadline is on October 17th.

Meanwhile, the markets are rattled by this latest turn of events, which may or may not get resolved quickly. For now, as noted, our guess is that the standoff will not endure much longer. However, with such essential services as provided by our military being met, with the air traffic controllers on the job, and with social security payments being made, there is no assurance that this will be the case. At the very least, the days leading up to October 17th will be full of drama.

As to other issues, there was little of note to chew on with respect to the economy yesterday, save for the issuance of a regional manufacturing survey, which showed a nice increase. However, that will change today, as the Institute for Supply Management will weigh in on manufacturing across the country. A small improvement is seen on that front. Then, on Thursday the companion index on non-manufacturing activity will be issued. On Friday, meanwhile, we were to get the Commerce Department's report on non-farm payrolls and the unemployment rate. Now, with the partial government shutdown, that report is unlikely to be forthcoming.

As to the economy is all this, our thought is that not much will be affected so long as this is a brief shutdown. However, should a deal to end it not be brokered within a month, or so, there would almost assuredly be an impact.

As to Wall Street, there seems little panic on the floor today as traders await the start of the new trading day in about an hour from now, as the Dow, S&P 500 Index, and NASDAQ futures are all showing modest gains. Of note, though, these suggested gains are less than they were earlier in the morning, so some caution may well be indicated at the open today. – Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.