Government shutdown? Wall Street isn't worried

Government shutdown? Stock market doesn't careThe last time the government went dark, the S&P 500 rose 4%. By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney) -- The looming threat of a government shutdown isn't causing investors to panic.

During the previous two times the government pulled the plug -- five days in November 1995 and another 21 days in January 1996, both during the Clinton administration -- the Dow (INDU) and the S&P 500 (SPX) moved higher. In fact, the market continued its bull run until the dot-com crash in early 2000.

"We remember the 1995 experience," said Brian Gendreau, market strategist at Financial Network Investment Corp. "The Clinton administration ended up making compromises, and the shutdown didn't last long. Investors don't expect anything different this year if it comes to that."

This time around, Democrats and Republicans have hit political gridlock on a spending bill that would cover the rest of fiscal year 2011. If the lights go out in Washington, Wall Street says it will be business as usual.

"Most investors view all of this as a natural course of the political process, so I don't see it having a very impact at all," said Drew Kanaly, CEO of Kanaly Trust, a wealth management firm in Houston.

Investors aren't even worried about the $14.294 trillion debt limit, which Congress will undoubtedly need to raise as early as April. That's because lawmakers have already raised the debt ceiling 12 times since 1995.

"That markets know that the United States will pay its bills, which is why all of this is a charade," said David Kotok, chief investment officer at Cumberland Advisors. "If the market actually ever doubts the country's ability to pay, all hell will break loose in the financial world. The shock of a U.S. default would be worse than the aftermath of Lehman Brothers and AIG."

Reality check: the real fears

As the political drama plays out in Washington, investors are focused on the political turmoil sweeping across the Arab world, and the corresponding rise in oil prices.

Last week, oil prices surged 9%, climbing as high as $103 a barrel on Thursday.

Mounting oil prices have pushed the gas prices to the highest level since October 2008, and analysts expect prices to continue higher.

That sharp rise in oil and gas prices spooked investors, and stocks tumbled about 2% last week, posting their worst losses since November.

"Not surprisingly, the real concerns are still centered on everything going on in the Middle East and North Africa," said Sam Stovall, chief investment strategist at Standard & Poor's. "We could see more uprisings and higher oil prices, which are a burden on consumer and could derail the fragile economic recovery."  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.08%4.25%
15 yr fixed3.17%3.23%
5/1 ARM3.30%3.37%
30 yr refi4.06%4.19%
15 yr refi3.16%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,122.01 15.31 0.09%
Nasdaq 4,569.62 -1.02 -0.02%
S&P 500 2,000.12 0.10 0.00%
Treasuries 2.36 -0.03 -1.25%
Data as of 6:09am ET
Company Price Change % Change
Bank of America Corp... 16.20 -0.13 -0.80%
Apple Inc 102.13 1.24 1.23%
Facebook Inc 74.63 -1.33 -1.75%
Yahoo! Inc 38.18 0.39 1.03%
Pfizer Inc 29.49 0.28 0.96%
Data as of Aug 27

Sections

Staggering interest from the Chinese in an immigration program has led the U.S. to run out of available visas for the first time ever. More

Former Fed chief Ben Bernanke believes the 2008 financial crisis was the worst in global history, topping even the Great Depression. More

Snapchat has gotten a $20 million funding round from Kleiner Perkins, valuing the company at $10 billion, according to the Wall Street Journal. More

Utah State professor Michael Glauser cycled 4,000 miles this summer, visiting 100 entrepreneurs across the country. Here's a snapshot of how they grew their businesses. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.