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Who's Afraid of a Government Shutdown? Not the Markets Apparently

In this Wednesday, Sept. 18, 2013, file photo, specialist Christopher Culhane works at his post on the floor of the New York Stock Exchange after the Federal Reserve announcement. Traders are shrugging off the partial shutdown of U.S. government operations on Tuesday, Oct. 1, 2013, sending stock futures higher. (AP Photo/Richard Drew)

The U.S. government formally shut down Tuesday morning after Congress failed to come to an agreement on a short-term funding bill.

But rather than tank on news of Washington’s continued gridlock, U.S. stocks are loving it (which is odd considering something as small as a sentence from Federal Reserve Chairman Ben Bernanke can send stocks plummeting).

Indeed, markets are apparently totally unfazed by recent events in the nation’s capital.

The Dow Jones industrial average was up 59 points, or 0.4 percent, to 15,188 by noon:

The S&P 500 index gained 12 points, or 0.7 percent, to 1,693:

The Nasdaq composite rose 34 points, or 0.6 percent, to 3,805:

There may be a good explanation for why markets are climbing higher Tuesday: traders and analysts are hopeful the shutdown will force Washington to sit down and get serious about the debt ceiling debate.

The shutdown itself has little (if any) real effect on the economy. The debt ceiling, on the other hand, is very serious. If Congress can’t come together for a deal on the nation’s borrowing limit, the Treasury Department runs the risk of defaulting on its pavements -- something it has never done before.

A payment default could cause real and lasting damage to the U.S. economy. So perhaps the shutdown has traders and investors hopeful Washington will get its act together – and that may explain why stocks are climbing higher Tuesday.

We shall see how this plays out as the week progresses:


Follow Becket Adams (@BecketAdams) on Twitter

Featured image via Associated Press.


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