The Markets This Week

October 8th, 2013

Stocks rode the D.C. seesaw last week as the broad market fell, rose, and ultimately finished flat on the week amid daily, if not hourly, conflicting comments from senior political leaders. Large-company share prices, however, dropped more than 1% for the week.

With the third-quarter-earnings reports season not beginning until this week, investors remain fixated on the partisan battle over the federal budget and the government’s need to raise its debt-ceiling authority. As of Friday, the partial government shutdown was in its fourth day.

The market’s rebound on Friday demonstrated how closely investors were watching Washington, as stock prices rallied on media reports suggesting that Speaker of the House John Boehner was perhaps more flexible than previously thought in working to increase the U.S. debt limit before the estimated Oct. 17 deadline. Technically, in the event that deadline isn’t met, the federal government probably wouldn’t run out of money until the end of the month.

The Dow Jones Industrial Average lost 186 points, or 1.2%, to 15,072.58, a second consecutive weekly drop. But the S&P 500 index finished essentially unchanged at 1690.50. The Nasdaq Composite index bucked the trend, rising 0.7%, or 26 points, to 3807.75.

“It was a manic-depressive market,” says Paul Nolte, a portfolio manager with Dearborn Partners. There’s hope of a handshake on the debt ceiling, but the competing sound bites from Democrats and Republicans aren’t helping, he says.

With shares off just about 2% from highs, the market hasn’t reacted much to the stalemate, he adds, and certainly less painfully than the 10%-plus slide back in August 2011. That’s when Standard & Poor’s downgraded U.S. debt amid the wrangling over lifting the ceiling. As things stand, the debt ceiling is more pressing than the budget (Source:  Barrons Online).

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