US stocks rally on hopes of short shutdown

NEW YORK (AFP) - US stocks on Tuesday jumped amid hopes the partial government shutdown will not seriously harm the economy.

The Dow Jones Industrial Average rose 62.03 points (0.41 per cent) to 15,191.70. The broad-based S&P 500 tacked on 13.45 (0.80 per cent) at 1,695.00, while the tech-rich Nasdaq Composite Index added 46.50 (1.23 per cent) at 3,817.98.

Analysts said many investors had already priced in a government shutdown, limiting the hit when it actually occurred at midnight Monday. Also, many predict a speedy resolution.

"Most people seem to be pretty optimistic that at some point, a deal will be struck and it won't go on too long," said William Lynch, director of investments at Hinsdale Associates.

But Mace Blicksilver, director of Marblehead Asset Management, said it would be "very hard" to extend the gains if the shutdown persisted for several days.

Analysts also pointed to a report showing manufacturing unexpectedly picked up in September. The Institute for Supply Management's purchasing managers index for manufacturing activity rose to 56.2 per cent last month from 55.7 per cent in August.

Apple shot up 2.4 per cent after activist investor Carl Icahn reported that he lobbied Apple chief executive Tim Cook for a US$150 billion (S$187.6 billion) share buyback. The two men had a "cordial" dinner on Monday night, Mr Icahn said via Twitter.

Ford tacked on 1.9 per cent after reporting a 6 per cent rise in September auto sales to notch its best September since 2006. But rival General Motors slipped 0.2 per cent after disclosing an 11 per cent sales decline from a year earlier.

Dow component Merck rose 2.4 per cent after announcing 8,500 more job cuts in an effort to save US$2.5 billion in annual costs by the end of 2015. The pharmaceutical giant has been under pressure following the expiration of patents on some key drugs.

Online retailer Amazon rose 2.7 per cent after announcing it would hire more than 70,000 full-time temporary workers for the holiday retail season, a 40 per cent increase over last year.

Drugstore chain Walgreens jumped 4.5 per cent after earnings of 73 cents per share bested expectations by a penny.

Bond prices fell. The yield on the 10-year Treasury rose to 2.65 per cent from 2.62 per cent on Monday, while the 30-year rose to 3.72 per cent from 3.68 per cent. Prices and yields move inversely.

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