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U.S. Stocks Rise as Optimism Grows Over Ending Impasse
U.S. stocks rose, with the Standard & Poor?s 500 Index trimming its a weekly decline, as optimism grew that the lawmakers would reach a deal to end the budget impasse and avoid a default on the federal debt.
Facebook Inc. climbed 2 percent after the operator of the world?s most popular social network said it will sell advertising on its Instagram photo service. Union Pacific Corp. declined 0.9 percent after its earnings forecast missed analysts? projections.
Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg
The S& P 500 climbed 0.4 percent to 1,685.06 at 10:26 a.m. inNew York. The Dow Jones Industrial Average added 40.84 points, or 0.3 percent, to 15,037.32. Trading in S& P 500 stocks was 15percent below the 30-day average at this time of day.
?Posturing aside, I think a resolution is on its way,? said Manish Singh, who helps manage $2 billion as head of investments at Crossbridge Capital in London. ?It?s good that the House speaker is determined to prevent a U.S. default even if the debt-ceiling bill does not have majority Republican support. A federal default is a bigger concern for markets than the budget disagreement.?
The S& P 500 has fallen 0.5 percent this week as the first partial government shutdown in 17 years began on Oct. 1, placing as many as 800,000 federal employees on unpaid leave and closing some services.
House Republicans prepared to meet at 10 a.m. in Washington to discuss a compromise to end the standoff. Speaker John Boehner has been telling his party that he won?t allow the U.S. to default on its debt, even if that requires Democratic votes, according to two Republican congressional aides.
Political ?Theatrics?
Pacific Investment Management Co.?s Bill Gross and BlackRock Inc.?s Larry Fink said the showdown will be resolved without a debt default.
?It?s theatrics posed by politicians to get ratings or to get their way via legislation,? Gross said yesterday at an event in Beverly Hills, California.
The budget impasse has raised concern that lawmakers will be unable to make progress on a deal to increase the debt limit. The Treasury has said measures to avoid exceeding the $16.7 trillion cap will be exhausted by Oct. 17 and warned yesterday that a default could have catastrophic consequences that might last decades.
The shutdown delayed the release of the Labor Department?s monthly payrolls report, which was due today. The lack of data is making it harder for Federal Reserve policy makers to assess the health of the economy as they consider when to start paring unprecedented monetary stimulus.
The shortage ?would tend to make me somewhat more cautious? about reducing the monthly pace of bond purchases, Atlanta Fed President Dennis Lockhart said yesterday.
Fed Bank of San Francisco President John Williams estimated yesterday a two-week government halt would shave 0.25 percentage point off fourth-quarter economic growth.
The S& P 500 has still rallied 18 percent this year, fueled by Fed stimulus and better-than-forecast corporate earnings that have helped the gauge rally more than 150 percent from a March 2009.
The Chicago Board Options Exchange Volatility Index, or VIX, dropped 2.2 percent to 17.28 today, trimming its weekly gain to 12 percent. The equity volatility gauge closed yesterday at the highest level since June 25.
All 10 main groups in the S& P 500 advanced, with health-care companies advancing 0.7 percent to pace gains. Johnson & Johnson rose 0.8 percent to $87.23.
Dentsply International Inc. jumped 3.3 percent to $44.66 for the biggest gain in the S& P 500. Bank of America raised its rating on shares in the dental supplies maker to buy.
Facebook rose 2 percent to $50.17 after saying it will sell advertising space on Instagram in its first effort to make money from its biggest ever acquisition.
In the most anticipated technology offering since Facebook, Twitter Inc. made public its S-1 prospectus yesterday and said it?s seeking to raise $1 billion. The documents suggested a valuation of $12.8 billion for the microblogging service.
Union Pacific dropped 0.9 percent to $154.02 after the railroad operator said it sees third-quarter earnings of $2.45 to $2.48 a share, compared with the average analyst forecast of $2.56. Operating revenue will increase as much as 4.5 percent, the company said, compared with a 7 percent gain predicted by analysts.
Competitor CSX Corp. slid 1.6 percent to $25.28 for the second-biggest decline in the S& P 500. (SPX)
To contact the reporter on this story: Namitha Jagadeesh in London atnjagadeesh@bloomberg.net
Buffett: Congress won't resort to 'extreme idiocy'
Warren Buffett says he's not worried that Congress will go past the point of " extreme idiocy," and refuse to raise the debt ceiling
Warren Buffett says he's not worried that Congress will go past the point of " extreme idiocy," and refuse to raise the debt ceiling before the Treasury Department runs out of cash later this month.
" We will go right up to the point of extreme idiocy, but we won't cross it," he said in an interview on CNBC Thursday morning.
Treasury Secretary Jack Lew says that if Treasury doesn't sell more bonds by Oct. 17, it won't be able to pay its bills, including the interest on debt that's already in the market.
Buffett had very harsh words for Republicans in Congress who are threatening not to raise the debt ceiling unless Obamacare is delayed or defunded. Buffett said if that deadline is missed by just a short period of time, " it will not bring us down." But he said it's crucial to make payments on existing debt.
" When the United States government issued bonds, they said it had the full faith and credit of the United States, it didn't say the full faith and credit of the United States unless one political party is unhappy about some extraneous issue," said Buffett.
Related: Debt ceiling - countdown to default
Buffett said that despite the willingness of House Republicans to shut down the federal government earlier this week over Obamacare, he doesn't believe that they will do the same with the debt ceiling.
" That won't work long term. They'll discover it won't work long term, the public will turn on them and they'll have a counter-revelation," he said.
Related: Investors bet on a U.S. default
Buffett appeared with former Treasury Secretary Hank Paulson, who served in the Bush administration during the financial crisis five years ago. Paulson was also very critical of the House Republicans who let the government shut down. He said this current crisis is " self-inflicted," because " one element that does not reflect the views of the Republican party" has " hijacked the debate." But he also doesn't believe Congress will miss the debt ceiling deadline.
" These guys may threaten to take their mother hostage, but they'll never hurt their mother," Paulson said.
Market Snapshot - Finger-Pointing Game Starts as Capitol Hill Fight Drags
Written By Stock Fanatic on Friday, October 4, 2013
Wall Street fell on the third day the US government closed its doors partially, with both President Barack Obama and Congressional leaders sticking to their guns. Obama blamed Republican House Speaker John Boehner for the shutdown. Boehner retorted that the president was ?steamrolling ahead? with a controversial healthcare bill with little care about where the money will come from. The fight to approve the budget drags on. But the main fear now is that this drama will lead to the US defaulting on its bond payments. The US Treasury Department warned in a report that default could see the US plunge into a downturn darker than the Great Recession. Treasury Secretary Jacob Lew added that the perception of default is enough to shake confidence in the world?s largest economy, calling to mind the fight two years ago which saw the US lose its top-notch credit rating. International Monetary Fund director Christine Lagarde chimed in, saying it is ?mission critical? that the situation is resolved. Mindful of the consequences, House Speaker Boehner is determined not to let the US go into default, according to reports.
In the only government jobs data issued during shutdown, the Labor Department said Thursday the number of Americans applying for jobless benefits rose to 308,000, near six-year lows. The Institute of Supply Management said its gauge of services growth fell to 54.4 in September from 58.6 in August
Europe equities slipped again, though positive purchasing manager index (PMI) and retail sales numbers put a floor to losses. Markit?s Euro zone services PMI rose to 52.2 in September from 50.7 in August, German companies leading the way once more. Retail sales rose 0.7% on-month in September, far exceeding the 0.2% forecast gathered by a Reuter?s poll of economists. (*more details in Currencies).
Southeast Asia
Southeast Asia stocks were mixed as investors weighed a US debt battle with an upbeat China growth read. Singapore?s STI fell 0.3%, Malaysia's KLCI was flat, and Indonesia?s JCI added 0.7%.
North Asia
Asia started the day nervously as the US government stayed closed a second day, but become bolder after an upbeat China services sector growth read added to evidence the Mainland is turning a corner. The official non-manufacturing PMI rose to 55.4 in September from 53.9 in August, a six-month high.
Taiwan?s TWSE climbed 1.7%, with stocks linked to Chinese domestic demand like food maker Uni-President Enterprises and energy firm Formosa Petrochemical registering gains.
Hong Kong?s Hang Seng rose 1%, helped by Macau gaming stocks reaching record levels as traffic data showed China?s golden week is off to a strong start. China remains closed for a weeklong holiday.
Tokyo stocks were dragged by Fast Retailing?s 0.8% fall after its local Uniqlo branches reported sales rose just 4.4% on-year in September, starkly lower than August?s 28.9% surge. A still-shuttered US government also cast a shadow, with the yen gaining against the USD the past few days. (Read Report)
Taiwan?s TWSE climbed 1.7%, with stocks linked to Chinese domestic demand like food maker Uni-President Enterprises and energy firm Formosa Petrochemical registering gains.