Stock futures edge higher, shutdown still in focus

Fri Oct 4, 2013 7:45am EDT
 
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By Ryan Vlastelica

NEW YORK (Reuters) - Stock futures edged modestly higher on Friday, indicating a rebound after a series of losses, though the uncertain outcome of a partial U.S. government shutdown, now in its fourth day, continued to worry investors.

The S&P 500 .SPX has fallen for nine of the past 11 sessions, with the losses driven by a budget stalemate in Congress that has closed the government since midnight Monday.

The shutdown appeared likely to drag on for another week or more, with little sign of progress towards a solution. Investors are also watching the situation for how the upcoming debate over the debt ceiling might play out.

While a short-term closure was expected to have a modest economic impact, the effect is expected to become more pronounced the longer it lasts.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said the shutdown would hurt growth in the last quarter of this year, while the Bank of Japan warned that a prolonged budget standoff would have a severe global impact.

"We're oversold, but is this a bounce with some muscle, or just a feeble move? This isn't a sign of health; a resolution would give us a strong bounce," said Adam Sarhan, chief executive of Sarhan Capital in New York. "Every day the shutdown continues, it reduces the chances of a strong fourth-quarter earnings season."

The debt ceiling issue is considered more severe, as it could result in a default on U.S. debt if no resolution is reached to increase it. On Thursday, the New York Times reported that House Speaker John Boehner told colleagues he would not let the United States default on its debt.

S&P 500 futures rose 4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 6 points and Nasdaq 100 futures rose 4.75 points.   Continued...

 
Traders work on the floor of the New York Stock Exchange, October 3, 2013. REUTERS/Brendan McDermid