Yet analysts who decode Washington for professional investors tell me their clients aren’t registering much concern over the latest bout of dysfunction. In part, that’s because they remain preoccupied by a pair of developments from the nation's capital with the potential to do more macroeconomic damage. “In terms of quantitative impact, investors haven’t been very focused on it,” says Stephen Myrow, managing partner of Beacon Policy Advisors. “They generally are way more focused on the Fed and trade.”

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So far, the shutdown, which is in its 19th day, has barely dented broad economic growth. The White House estimates the partial closure cuts output by .1 percent every two weeks. JPMorgan sees more pain, with up to .2 points shaved for every week of the shutdown, though the economy should mostly make it up once it’s over.

History suggests the stock market mostly shrugs it off a shutdown: Over the 20 shutdowns dating back to 1976, the S&P 500 has posted a median return of 0 percent, according to data from LPL Financial Research. And the market has actually gained ground during each of the past five.

This time, Trump officials have taken steps at the margins to limit fallout that could have weighed on consumer spending. The White House on Monday directed the Internal Revenue Service to issue tax refunds to millions of Americans, and the administration pledged Tuesday to continue issuing food stamps through February.

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In a letter to lawmakers, the U.S. Chamber of Commerce writes that it wants the government to reopen because it's “hearing every day from businesses across the country, the adverse consequences of the shutdown are wide and growing.”

And the pain is indeed building in certain corners of the economy: Realtors, for example, report they are starting to see closings delayed or canceled, in part because federal agencies backed their mortgages. And the shutdown has stalled Trump's program to bail out farmers hurt by the trade war, since the Agriculture Department office processing the checks has closed. According to a new Huffington Post/ YouGov poll, 23 percent of respondents expect to be personally affected.

In the immediate term, the shutdown is having another practical consequence for investors, denying them some key economic data.

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Per the FT: “The Commodity Futures Trading Commission has stopped publishing weekly data on traders’ futures positions in interest rates, currencies, equity indices and commodities The derivatives regulator’s ‘commitments of traders’ reports are used as a weathervane of market sentiment. Robert Hillman, chief investment officer for investment group Neuron Advisers, said the data allow fund managers to identify which types of investment strategies would be vulnerable in a market shock. ‘That can give you an indication of risk and potentially alter our models of risk in the market,’ he said.”

Yet stocks rallied Tuesday for their third straight session, with the major indexes climbing about 1 percent — gains analysts attributed to signs of progress in U.S.-China trade talks. Given the agita the trade war has given investors, Compass Point’s Isaac Boltansky said the market would have posted an even stronger performance if it weren't for the “overhangs relating to the shutdown and the dueling addresses,” from Trump and the Democrats on Tuesday evening.

Boltansky noted in an email that his clients have asked about the impact of 800,000 federal employees going without paychecks, the uncertainty at airports as TSA workers go unpaid, “and consideration of the impact on IPOs and basic market operations given the SEC.” His take: “The market can survive a shutdown that lasts days, but anxieties begin ratcheting higher when shutdowns are measured in weeks.”

So far, investors appear to be betting the standoff will end soonish.

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“It’s not the sort of thing Wall Street cares about if it’s short, and they believe it will be short,” says Charles Gabriel, president of Capital Alpha Partners.

And in fact, Gabriel said, it could prove a positive longer-term development for markets if Trump now battles his position on the wall to a final settlement, one way or another. That's because it would limit the number of legislative fights looming later this year packing a more disruptive punch. Among them are likely struggles over ratifying Trump’s renegotiated NAFTA deal; lifting budget caps on federal spending; hiking the debt ceiling; and, at least some chatter about possible impeachment.

But a protracted shutdown would become a market risk if it becomes “part of a mosaic about the broader dysfunction in Washington,” said Ed Clissold, chief United States strategist at Ned Davis Research. “If we get to the end of the month, we’ll be in uncharted territory.”

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Myrow said the breakdown over a task as basic as funding the government should discourage anyone holding out hope for a bipartisan breakthrough on infrastructure or drug pricing legislation. “We already had the death knell, but this is banging the gong one more time.”

MARKET MOVERS

— Stocks up, but volatility still looms. WSJ's Gunjan Banerji: “The rebound in U.S. stocks since Friday hasn’t convinced all investors that volatility in the market is over. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average each climbed on Monday, continuing a rally that started at the end of last week after a strong jobs report and comments from the Federal Reserve that the central bank isn’t on a fixed path to raising interest rates.

“But the futures curve tracking Wall Street’s 'fear gauge,' the VIX, remained inverted Monday, with contracts expiring in the near term more expensive than ones dated further out in the future — an indication that some investors expect wild price swings to continue. This type of relationship, known as backwardation, has lasted for 66 days — a stretch of time that is second only to the 75-day period from September to December of 2008, during the depths of the financial crisis.”

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Investors eye possible profit drops. Caroline Valetkevitch at Reuters: “Investors are growing more fearful that U.S. companies’ profits could shrink this year following Apple’s warning of soft demand in China, coupled with mounting evidence of a drag from tariffs, a global slowdown and fading tailwinds from tax cuts. Profit-growth estimates for 2019 had already been eroding for months before widely held Apple Inc darkened the outlook further last week with the first cut to its sales forecast in more than 15 years.

“Earnings this year were never going to rise as quickly as in 2018, when federal tax cuts fueled growth rates above 20 percent for S&P 500 companies for much of the year . . . For 2019, analysts now see profits growing by 6.8 percent, down sharply from an Oct. 1 estimate of 10.2 percent earnings growth . . . That has some investors watching for signs that U.S. stocks could slip into a profits recession, defined as at least two straight quarters of year-over-year earnings declines. The last of those occurred from July 2015 through June of 2016, which dovetailed with a broad run of stock market underperformance.”

— For tech comeback, look to Apple. CNBC's Yun Li: “The tech sector has come roaring back — Amazon has risen more than 10 percent and Netflix has surged 19 percent in the new year. But if history is any guide, this comeback won’t last without Apple’s help. In fact, the S&P 500 tech sector has never outperformed the S&P 500 when Apple fell more than 30 percent, according to Bank of America Merrill Lynch . . . Apple’s stock has plummeted more than 36 percent since Oct. 3, when the stock hit a 52-week high of $233.47.

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“Shares of the iPhone maker took a huge hit when it slashed revenue guidance on Jan. 2, blaming the slowdown on weaker sales in China. The stock tanked 15 percent on that day. But when Apple finally finds a bottom, there will be 'a big rally' in tech . . . Technology has historically outperformed the market when Apple bottomed. The sector topped the S&P 500 over the next 12-month period by 7.2 percent and 21.9 percent when Apple troughed in 2013 and 2016, respectively.”

Tim cook responds to 'naysayers.' CNBC's Elizabeth Gurdus: “Apple’s growing ecosystem of devices and services is 'probably underappreciated' by naysayers on Wall Street, CEO Tim Cook told CNBC in an interview Tuesday. The iPhone maker’s stock has lost roughly 14 percent in the last 12 months as Wall Street soured on its prospects amid reports of iPhone production hiccups . . . Apple’s stock is the most 'unloved' it has been since 2005. 'In terms of the naysayer, I’ve heard this over and over again,' Cook said . . . 'I’m not defensive on it. This is America and you can say what you want.'"

— Uber presses on with planned IPO. WSJ's Newley Purnell: “Uber Technologies Inc. Chief Executive Dara Khosrowshahi said market turbulence in the U.S. would be unlikely to affect the ride-hailing titan’s plans for a public listing. . . . Mr. Khosrowshahi said Uber was internally on track to list this year, having previously said he expected to seek a debut in the second half of 2019 in what would be one of the biggest public offerings planned for the year.

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“The company is also keeping an eye out for a possible debut by rival U.S. firm Lyft Inc., which has indicated it plans to seek an IPO this year and filed confidentially with the SEC the same day Uber did. . . . The San Francisco company’s banking advisers have suggested Uber could go public at a valuation of $120 billion . . . Tech stocks have been hard hit amid worries about the health of the global economy and trade tensions between the U.S. and China. The turmoil could cast a pall over some companies’ IPO plans in 2019. U.S. stocks closed out last year with their steepest annual declines since the financial crisis.”

— Saudi Arabia may invest in U.S. natural gas. WSJ's Sarah McFarlane and Summer Said: “Saudi Arabia is nearing a deal to invest in U.S. liquefied natural gas, a landmark decision for the kingdom, which in the past had been a huge supplier of energy to America. Saudi Arabian Oil Co., known as Aramco, has narrowed its focus to a shortlist of at least four U.S. LNG projects and intends to announce a deal in the first half of this year . . .

“Any such investment would mark a sea change in the energy flows between the U.S. and Saudi Arabia. America’s shale revolution has broken years of dependence on Middle Eastern oil, to the extent that the International Energy Agency expects the U.S. to become a net energy exporter by 2023.”

TRUMP TRACKER

TRADE FLY-AROUND:

— On U.S.-China trade talks, progress but a ways to go. WSJ's Lingling Wei: “The U.S. and China made progress on narrowing their differences on trade issues, especially on purchases of U.S. goods and services and widening access to China’s markets, though the two sides are far from striking a deal. In two intense days of talks in Beijing that will continue into Wednesday, U.S. and Chinese midlevel negotiators addressed a number of nettlesome issues and tried to specify how to ensure China will carry out pledges it made . . .

“Both sides believe they’re making enough progress this week for a next round of talks among cabinet-level officials, probably later this month in Washington. Divisive issues remain between the two sides and within the Trump administration . . . One big challenge is figuring out how to hold Beijing to commitments to keep Chinese firms and officials from pressuring U.S. partners into transferring technology against their will.”

China extends an olive branch. NYT's Sui-Lee Wee and Keith Bradsher: “China is buying American soybeans again and has cut tariffs on American cars. It is offering to keep its hands off valuable corporate secrets, while also allowing foreign investors into more industries than ever before. Beijing hopes all of that will be enough to let [Trump] declare victory and end the trade war between the two largest economies. But the offer combines some real concessions, like lower tariffs, with nebulous promises, and it will be hard to ensure that China sticks to its commitments.

“That could make it a tough sell in Washington. The Trump administration’s trade hawks are still pushing for a lot more, while even the doves fret that the new promises need effective enforcement to make sure that China follows through . . . Many American officials and businesses complain that China has long wiggled out of commitments — accusations that China denies. And the more hawkish wing of the administration contends that Beijing’s assurances have been so vague that it is hard to discern any meaningful progress, a position some analysts support.”

— Trump wants a deal to calm markets. Bloomberg's Jenny Leonard and co.: "According to people familiar with the matter, Trump’s willingness to cut a deal with Beijing is driven in large part by his desire for markets to rally. He publicly said he’s eager to make a deal that benefits both sides while also stressing that China’s slowing economy and falling stock market signal the country is more desperate than the U.S. for a speedy outcome... In private, some administration officials have confessed frustration in recent weeks with the market declines, appearing bemused by investors’ concerns over the China trade wars and how to address them."

Will use the State of the Union to ask for broader tariff powers. More from Bloomberg: "Trump is expected to urge Congress in his State of the Union address this month to pass new legislation that would expand his powers to break down non-tariff barriers to American exports, according to people familiar with the plan. The bill, crafted by White House trade adviser Peter Navarro’s office along with the Trade Representative’s office and the Commerce Department, would seek to give the president broad authority to increase U.S. tariffs if he considers other countries’ tariff and non-tariff measures to be too restrictive, a person briefed on the legislation said."

MELTDOWN WATCH:

POCKET CHANGE

— Sears limps along. WSJ's Lillian Rizzo and Patrick Fitzgerald: “Sears Holdings Corp. isn’t dead yet and billionaire Edward Lampert still has a chance to keep the storied retailer alive. Sears bankruptcy lawyer Ray Schrock told Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., that the retailer would move forward with a planned Jan. 14 auction. The auction is conditioned on Mr. Lampert providing a $121 million deposit by tomorrow afternoon, Mr. Schrock said. Mr. Lampert’s hedge fund, ESL Investments, has bid $4.4 billion to buy the business out of bankruptcy. His plan would keep about 425 stores open.”

— Ex-Nissan chief Ghosn makes his case. NYT's Motoko Rich: “Carlos Ghosn and his lawyers are laying out the most comprehensive case yet for his innocence, nearly two months after his arrest shook the auto business and tarnished his reputation as an industry titan. Still, it may not be enough to free him from jail for months, as prosecutors try to build a case against the ousted Nissan Motor chairman and onetime leader of an automaking juggernaut that builds more than 10 million cars annually.

“Mr. Ghosn’s chief defense lawyer in Japan said on Tuesday that prosecutors had no basis for holding him in jail on allegations that he improperly transferred personal losses to Nissan’s books, saying that board members had approved the transactions . . . The defense sets the stage for what could be a lengthy legal battle between Mr. Ghosn and Japanese prosecutors. And Mr. Ghosn may remain in custody for months.”

— Job openings fall but prognosis still positive. AP's Christopher Rugaber: “U.S. job openings fell in November from the previous month, but the number of available positions remained healthy. Job openings slipped 3.4 percent to a seasonally adjusted 6.9 million, the Labor Department said Tuesday. That is the fewest openings in five months, but still 16 percent higher than a year ago. The job market remains strong despite sharp stock market declines last month, interest rate increases by the Federal Reserve and a slowing global economy that is also bedeviled by trade fights.

“Last week’s blockbuster jobs report helped assuage concerns about the economy, as it showed that hiring reached a 10-month high in December. That suggests employers are desperate to hire, a trend that appears to be finally pushing up wages. Average hourly pay rose 3.2 percent in December from a year earlier, Friday’s jobs report showed, matching the best yearly gain since the recession.”

MONEY ON THE HILL

— GOP support for Trump's wall starts to crack. The Post's Erica Werner and Mike DeBonis: "Divisions grew among congressional Republicans on Tuesday over [Trump’s] shutdown strategy, as a number of lawmakers expressed consternation over the possibility that he’d declare a national emergency to build his border wall, while others voiced some support for Democrats’ plans to reopen most of the government without the wall money Trump has demanded.

"Ahead of a nationally televised address by Trump, Vice President Pence lobbied House Republicans behind closed doors to stand with the president, reminding them that Trump would not sign any spending bills passed by Democrats unless he gets the wall funding he wants and urging them to reject the Democratic strategy.

"But in a potentially perilous sign for Trump on the 18th day of the partial shutdown, cracks were multiplying within GOP ranks even before Pence ventured to Capitol Hill late Tuesday. The dissension was especially evident over whether Trump should declare a national emergency that would allow him to circumvent Congress and draw on military construction funds to build his wall, with some normally reliable supporters voicing concerns over the approach."

— Booker, Harris sound out Wall Street. CNBC's Brian Schwartz: "Wall Street executives have heard from several potential 2020 Democratic candidates for president, including Sens. Cory Booker and Kamala Harris, as recently as last month, CNBC has learned... A CNBC report last week about New York Sen. Kirsten Gillibrand's outreach to Wall Street triggered outrage on the left.

"Billionaire and Blackstone Chief Operating Officer Jonathan Gray; Robert Wolf, CEO and founder of economic advisory firm 32 Advisors, and Mark Gallogly, a founder of private investment firm Centerbridge Partners, are just a few of the Democratic financiers who have spoken with 2020 hopefuls about a wide range of topics, including the upcoming campaign, according to people with direct knowledge of the matter.

DAYBOOK

COMING SOON:

THE FUNNIES

— From the New Yorker's P.C. Vey, circa 2016.

BULL SESSION

This 149-year-old law is why we have government shutdowns

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