The stock markets in the United States rallied despite the partial shutdown of the federal government after lawmakers failed to reach an agreement to pass budget legislation. Market analysts noted that investors seemed less concern regarding the situation given the fact that a similar political standoff on passing the government budget occurred in the past. Investors also projected that the impact of the shutdown to the U.S. economy will be limited.
The government went into shutdown after the Senate rejected the proposed budget bill of lower chamber, which included a provision intended to delay the penalty and subsidies portion of the Patient Protection and the Affordable Healthcare Act popularly known as Obama Care.
Stock Markets Gain
The Down Jones Industrial Average (DJIA) surged by 0.41% to 15, 191.70 points, the S&P 500 climbed by 0.80% to 1,695 points, and the Nasdaq went up by 1.23% to 3,817.98 points on Tuesday.
The stock price of companies in the healthcare industry recorded gains including Merck & Co. (NYSE:MRK), Walgreen Company (NYSE:WAG), and UnitedHealth Group (NYSE:UNH).
Merck & Co surged by 2.38% to $8.74 per share after Goldman Sachs analyst Jami raised its price target for the stock to $54 a share. According to the analyst, although 2003 is a challenging
year for the company, due patent cliffs and R&D setbacks, its cost cutting, restructuring measures are proactive as well as its focus on diabetes, acute care, vaccines, and oncology.
The stock price of Walgreen Company increased by 4.54% to $56.24 a share after its fourth quarter earnings beat the consensus estimates of Wall Street analysts. The company posted $0.73 earnings per share on $17.94 billion revenue. The drugstore chain expected to benefit from the Obama Care.
Meanwhile, UnitedHealth Group gained 1.37% to $75.28 per share due to the huge turnout of enrollment during the opening of the Obama Care exchanges. Americans displayed strong interest to enroll and shop for health insurance through the exchanges.
Investors Not Surprised with the Shutdown
Bruce Bittles, chief investment strategist at RW Baird & Co. told Bloomberg, “We have gone through this before; it’s not too surprising that investors aren’t frightened by it. The selling pressure lifted, and that has encouraged a lot of buyers here looking into buying the dip.”
In an interview with Politico, Jim O’Sullivan noted that there were 17 shutdowns between 1976 and 1996, and according to him, a temporary shutdown should not be a big deal based on that perspective.
Raising the Debt Ceiling is Critical
Sullivan pointed out that the issue on raising the government’s debt ceiling is critical. He said, “The consequences would, arguably, be much greater if no agreement were reached on the debt limit; its critical date is still several weeks away.”
The members of the Congress are also wrangling on raising the debt ceiling. The Treasury department already warned lawmakers that extraordinary measures used by the government will be exhausted by October 17. Failure to raise the borrowing limit means would be harmful because the government will not have enough money pay its bills and it could result to a downgrade on the credit rating of the United States.
President Obama Blames Republicans ‘Ideological Crusade’
President Barack Obama blamed the Republicans for the unnecessary shutdown of the government because of their “ideological crusade” to derail the Obama Care. The President pointed out that the shutdown is strategy to prevent the government to provide coverage to 15% of the population in the United States without health insurance. He said it was “strange that one party would make keeping people uninsured the centerpiece of their agenda.”