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Stocks rise as investors weigh effects of shutdown

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U.S. stocks rose Tuesday as investors speculated that the economic effects of the first partial government shutdown in 17 years would be limited.

Other events had a strong effect on industry sectors. For example, WellPoint Inc. added 2.4 percent to pace gains among health-care providers as open enrollment for the new exchanges mandated by the Affordable Care Act began Tuesday.

The S&P 500 rose 0.8 percent to 1,694.20 in the early afternoon, after falling Monday for the seventh time in the past eight sessions. The Dow Jones Industrial Average gained 57.60 points, or 0.4 percent, to 15,187.27.

“We have gone through this before, it’s not too surprising that investors aren’t frightened by it,” said Bruce Bittles, chief investment strategist at RW Baird & Co., which oversees $100 billion. “The selling pressure lifted, and that has encouraged a lot of buyers here looking into buying the dip.”

Lawmakers in Washington failed to agree Monday on a federal budget. The resulting shutdown will put as many as 800,000 federal employees out of work temporarily and cost the U.S. at least $300 million a day in lost output at first, according to IHS Inc. That compares with the country’s $15.7 trillion economy.

Congress now faces a dispute over raising the $16.7 trillion debt ceiling this month. The Treasury has said measures to avoid exceeding the borrowing limit will be exhausted on Oct. 17. The U.S. won’t have enough money to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office. Failure to increase the limit could lead to a downgrade of the government’s credit rating.

The S&P 500 has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg since 1976. That compares with an average return of 9 percent over 12 months.

“This is a case of yes, this is a a big ugly story, but politicians do usually find a way to patch things up,” said Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co.

The shutdown will halt federal agency reports on the economy. A Commerce Department report on construction spending due Tuesday won’t be released as scheduled, and the Labor Department won’t publish its closely watched monthly employment report on Friday if the government remains closed.

Data Tuesday from the privately run Institute for Supply Management showed U.S. manufacturing expanded in September at a faster pace than forecast, indicating U.S. factories will provide a bigger boost to the expansion.

Investors have been scrutinizing economic reports to gauge whether growth is robust enough for the Federal Reserve to begin curtailing its stimulus.

The S&P 500 added 3 percent last month as the central bank unexpectedly refrained from reducing its $85 billion in monthly asset purchases. The gauge gained 4.7 percent in the third quarter. Three rounds of Fed stimulus and better-than-forecast corporate earnings have pushed the S&P 500 up as much as 155 percent from a March 2009 low.

Earnings at S&P 500 companies expanded 1.8 percent last quarter, projections compiled by Bloomberg show. Alcoa Inc., Yum! Brands Inc. and Safeway Inc. are among the 316 companies in the gauge scheduled to report in October. Analysts’ forecasts show earnings will increase at the fastest pace in two years during the fourth quarter.

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  1. Why not take some time to do some research before traveling to that Indiana town or city, and find the ones that are no smoking either inside, or have a patio? People like yourself are just being selfish, and unnecessarily trying to take away all indoor venues that smokers can enjoy themselves at. Last time I checked, it is still a free country, and businesses do respond to market pressure and will ban smoking, if there's enough demand by customers for it(i.e. Linebacker Lounge in South Bend, and Rack and Helen's in New Haven, IN, outside of Fort Wayne). Indiana law already unnecessarily forced restaurants with a bar area to be no smoking, so why not support those restaurants that were forced to ban smoking against their will? Also, I'm always surprised at the number of bars that chose to ban smoking on their own, in non-ban parts of Indiana I'll sometimes travel into. Whiting, IN(just southeast of Chicago) has at least a few bars that went no smoking on their own accord, and despite no selfish government ban forcing those bars to make that move against their will! I'd much rather have a balance of both smoking and non-smoking bars, rather than a complete bar smoking ban that'll only force more bars to close their doors. And besides IMO, there are much worser things to worry about, than cigarette smoke inside a bar. If you feel a bar is too smoky, then simply walk out and take your business to a different bar!

  2. As other states are realizing the harm in jailing offenders of marijuana...Indiana steps backwards into the script of Reefer Madness. Well...you guys voted for your Gov...up to you to vote him out. Signed, Citizen of Florida...the next state to have medical marijuana.

  3. It's empowering for this niche community to know that they have an advocate on their side in case things go awry. http://www.youtube.com/watch?v=Lrst9VXVKfE

  4. Apparently the settlement over Angie's List "bundling" charges hasn't stopped the practice! My membership is up for renewal, and I'm on my third email trying to get a "basic" membership rather than the "bundled" version they're trying to charge me for. Frustrating!!

  5. Well....as a vendor to both of these builders I guess I have the right to comment. Davis closed his doors with integrity.He paid me every penny he owed me. Estridge,STILL owes me thousands and thousands of dollars. The last few years of my life have been spent working 2 jobs, paying off the suppliers I used to work on Estridge jobs and just struggling to survive. Shame on you Paul...and shame on you IBJ! Maybe you should have contacted the hundreds of vendors that Paul stiffed. I'm sure your "rises from the ashes" spin on reporting would have contained true stories of real people who have struggled to find work and pay of their debts (something that Paul didn't even attempt to do).

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