Federal Government shutdown continues in U.S. - RK Global

U.S. stocks rebounded on Friday, but major stock indexes ended the week lower as a federal government shutdown continued for a fourth day, with no sign of an end to a budget stalemate in Washington. The major indexes were mixed for the week, with the Dow Jones Industrial Average moving notably lower, while the S&P 500 was roughly flat and the Nasdaq enjoyed modest gains. Smaller-cap stocks outperformed for much of the week, and the Russell 2000 even managed to set a new record high on Tuesday. As many had feared, the federal government entered a partial shutdown on Tuesday after Congress failed to pass a continuing resolution to fund the budget and keep it open. The market's reaction to the news was benign, however, perhaps because stocks had already declined in recent days in anticipation of the event. Stocks also got a boost from the Institute of Supply Management's purchasing managers' index, which indicated that manufacturing activity in the U.S. had increased for the fourth consecutive month. News of layoffs and other cost-cutting measures at pharmaceutical giant Merck also helped the major indexes. Debt ceiling fears appeared to hit the market Thursday morning, when stocks began a steep descent that brought the S&P 500 down by roughly 1.4%. The market arrested its descent, however, when word leaked that House Speaker John Boehner had assured some colleagues that he would not allow the U.S. to default. It is expected that the implications of the government shutdown remain to be seen, but recent manufacturing data are a sign that the sector is recovering from the double blow of increased taxes and sequester-forced spending cuts earlier in the year.

Outlook for Next Week

Markets are actually looking at about three weeks of tension over fiscal issues in the United States and key economic readings that will play into speculation over when the Federal Reserve will finally begin to "taper," or pull back from its huge bond-buying stimulus program. U.S. stocks are likely to face another week of rising turbulence as efforts to settle the budget dispute in Washington drag on, leaving investors worried about the more critical issue of raising the U.S. debt ceiling.

Source : Equity Bulls

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