Tuesday’s Midday Movers: 3 Stories Driving Markets

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The major U.S. stocks were falling again Tuesday as investors maintained concern about the prolonged fiscal debates in Washington. As of 12 p.m.:

DJIA: -0.56% to 14852.82 S&P 500: -0.73% to 1663.84 NASDAQ: -1.49% to 3714.08
Gold: -0.55% to 70.83 Oil: +0.53% to 24.59 U.S. 10-Year: -0.49% to 26.21

Here are three stories helping shape the market Tuesday afternoon:

1. The Government Shutdown Is Hurting Americans’ Confidence and Spending: Since hitting lows in March 2009, the Dow Jones Industrial Average and the broader-based S&P 500 have skyrocketed about 125 percent and 145 percent, respectively. The most recent reading of the Standard & Poor’s/Case-Shiller index has showed that housing prices have advanced 21.2 percent since March 2012, when prices bottomed out after tumbling for months, and that gain has given homebuilders pricing power once again.

With strong cost-cutting measures in place to offset sluggish global economic growth, corporations also have seen soaring profits, which have increased 18.6 percent over the past year. The only worry is that the corporate strategy of cutting costs and squeezing suppliers may be running out of momentum. Still, every major U.S. bank’s balance sheet has strengthened, showing adequate liquidity to withstand a deep recession, and the manufacturing sector has begun to grow. In fact, many signs point to a recovery, though not all.

2. Is the Senate Cooking Up a Way to Dodge Default? We don’t want to watch but we just can’t look away: the partial shutdown of the U.S. government has stumbled through its first week, and Uncle Sam is just nine days away from cracking his head against the debt ceiling.

Most of the conversation surrounding the impasse is negative, but there is news this week that modest progress has been made toward untangling the political Gordian knot that has locked Democrats and Republicans together in an awkward fiscal death dance. Senate Democrats — who control the upper house — have reportedly begun drafting legislation that would raise the debt ceiling with no strings attached. A vote on the measure could come as early as Friday, but Senate Republicans could use procedural roadblocks to delay movement until Tuesday.

3. Is the Manufactured Political Crisis Already Weighing 0n Small Businesses? In the face of a sluggish economy and a government that can’t agree on anything, small business owners remain skeptical about the future. The National Federation of Independent Business, the leading nonprofit small business association representing small and independent businesses, reported that its Small Business Optimism Index edged 0.2 percent lower in September to 93.9, compared to 94.1 the previous month. The September reading is about 13 points higher than the lowest point seen during the recession but six points below the pre-2008 average.

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