[Chart courtesy of MarketWatch.com]
After beginning the day lower on the failure of U.S. lawmakers to come to a debt ceiling agreement to avoid a potential default, stocks ended a volatile session with modest gains to finish higher as bits of news about potential progress came throughout the day. Volume was lighter than usual due to the closure of U.S. bond markets for Columbus Day.
The domestic economic calendar was also empty, while several markets overseas were closed for holidays. Stocks slumped at the open after the weekend ended without any concrete progress in Washington. Despite the opening weakness, dip-buyers were quick to step in, drawing encouragement from late-morning reports indicating a bipartisan meeting was scheduled to take place at the White House.
The rebound continued into the afternoon with upbeat quotes from lawmakers providing additional support. A brief slip ensued during the final 90 minutes of the session when the White House meeting was postponed in order to allow more time for talks. Strikingly, the market did not appear too concerned with the cancellation as the major averages ended the session on their highs.
Eight of ten sectors posted gains while telecom services (-0.7%) and utilities (-0.6%) spent the day in negative territory. On the upside, the technology sector (+0.5%) fueled much of the session-long rebound as top components rallied. The outperformance of tech shares helped the Nasdaq end ahead of the broader market. The index also drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF ended higher by 0.8% after weighing on the tech-heavy index in early going.
Elsewhere, the energy sector (+0.6%) displayed relative strength as crude oil added 0.2% to $102.22 per barrel. Meanwhile, other commodities also posted gains. Gold futures rose 0.3%. In addition to the debt ceiling, the government shutdown, entering its third week, was seen as a drag on the economy by shaving a small percentage off the GDP with each passing day.
In a sign of the market’s caution, the CBOE Volatility index rose 1.8 percent. On the horizon are corporate earnings this week, with results from Citigroup, Coca-Cola, Johnson & Johnson, and Intel on tap. Traders are looking to see what kind of impact the issues in Washington have had on results and forecasts.
Our Trend Tracking Indexes (TTIs) edged higher as well with the Domestic TTI reaching +3.26% while the International TTI closed at +6.61%.