"The news of a partial federal shutdown has been received pretty calmly," wrote Kit Juckes, analyst for Societe Generale, in a market report.
Congress failed to agree on a short term extension of government funding late Monday, initiating a series of complex procedures to power down the federal agencies.
A government shutdown could cost the U.S. economy roughly $1 billion a week in pay lost by furloughed federal workers.
The dollar slipped against other major currencies but stock market reaction was muted.
Head of trading at ETX Capital Joe Rundle said traders' apparent appetite for risk reflected the view that, if resolved quickly, a government shutdown "will do little damage to the overall health of the U.S. economy."
Investors are also monitoring a separate battle in Washington to raise the debt ceiling, as failure to do so could leave the U.S. unable to pay its bills and hurt its credit rating.
Several economic releases are slated for Tuesday, with the Census Bureau due to publish its monthly report on construction spending, and the Institute for Supply Management monthly manufacturing report. Major automakers will issue their monthly sales reports throughout the day.
In corporate news, drugstore operator Walgreen (Fortune 500)is set to release its quarterly results before the opening bell. ,
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