Stocks shrug off shutdown, close higher

Adam Shell and Kim Hjelmgaard | USA TODAY

Show Caption Hide Caption Stocks resilient to government shutdown The partial shutdown of the U.S. government failed to spook markets Tuesday, with stock indexes rising around the world. Analysts say significant damage to the U.S. economy is unlikely unless the shutdown lasts more than a few days.

Wall Street reacts calmly as government shutdown begins

Fourth quarter kicks off after the S%26P 500 posted a 4.7%25 gain in 3Q

Confidence data fuel Japan gains

Wall Street investors were reacting calmly to the first day of a partial shutdown of the U.S government.

Stocks closed higher as the Dow Jones industrial average gained 62.03 points, or 0.4%, to 15,191.70 and the Standard & Poor's 500 index rose 13.45 points, or 0.8%, to close at 1,695.00.

The Nasdaq composite index gained 46.50 points, or 1.2%, to 3,817.98. The tech-heavy index is now up 200% from its March 9, 2009, bear market low.

OUTLOOK: Threats to stocks loom as Q4 kicks off

With the fourth-quarter kicking off today, Wall Street is still betting that the shutdown will be shortlived and the impact on financial markets and the economy will be minimal.

Rod Smyth, chief investment officer at Riverfront Investment Group, says his firm is not turning defensive, or raising cash, just yet.

"None of the government shutdowns since 1976 produced chaos in financial markets or prolonged speculation of default," he told clients in a research note.

Even if the market did suffer an over-reaction to the fiscal impasse in Washington, he says any correction would be tough to trade successfully. Smyth is betting that when the political dysfunction dissipates, the market will likely move higher on the strength of a "positive outlook" for the global economy.

Tina Fordham, a political strategist at Citigroup, says the "shutdown feels short term to us."

"With political pressure sure to increase, this suggests a near-term resolution to the crisis," perhaps as early as today.

In the latest encouraging news on the economy, a private industry group reported Tuesday that U.S. manufacturing expanded at the fastest pace since April 2011 last month on stronger production and hiring.

Benchmark oil for November delivery was down 42 cents to $101.91 per barrel in electronic trading on the New York Mercantile Exchange. The contract grade fell 54 cents to close at $102.33 a barrel on the Nymex on Monday.

Gold futures for December delivery fell $39, or 2.9%, to $1,288 an ounce.

In government bond trading, the yield on the 10-year note rose to 2.64% from 2.61% late Monday.

Global markets shook off the funding impasse over extending the government's budget, with stocks in Japan buoyed by the latest "tankan" survey of business confidence. The Nikkei 225 rose 0.2% to 14, 484. 72. Markets in mainland China and Hong Kong are closed for public holidays.

European markets were mixed. Britain's FTSE 100 index was flat at 6,460.01 as Germany's DAX index rose 1.1% to 8689.14 and France's CAC 40 index gained 1.3% to 4,196.60.

"Markets have become more and more rational over the last 24 months, particularly when they've seen central banks … all working very closely together to make sure their economies are supported," said Evan Lucas, market analyst at IG in Melbourne, Australia.

In the run-up to the shutdown, stocks fell Monday. The Dow dropped 0.8% to close at 15,129.67. The S&P 500 fell 0.6% to 1,681.55. The Nasdaq fell nearly 0.3% to 3,771.48.

Contributing: The Associated Press