This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bank Stocks Rise as Investors Shrug: Government Shutdown Winners

NEW YORK ( TheStreet) -- New York Community Bancorp (NYCB) was the winner on Tuesday among stocks of large U.S. banks, with shares rising over 2.5% to close at 15.48.

The broad indices showed plenty of strength after the federal government shutdown at midnight, owing to the inability of the House of Representatives and the Senate to agree on a budget to send to President Obama. The Dow Jones Industrial Average (^DJI) ended with a gain of 0.4, while the S&P 500 (SPX.X) was up 0.8% and the NASDAQ Composite (^IXIC) rose 1.2%.

Bank stocks fared quite well, with the KBW Bank Index (I:BKX) rising 0.7% to 62.68, with all 24 index components showing gains.

Investors shrugged off the latest game of budget brinksmanship in Washington, and discounted the possibility of a default by the government in mid-October, as the market yield on 10-year Treasury bonds was up only three basis points to 2.65%. U.S. Treasury Secretary Jack Lew in a letter to Speaker of the House John Boehner (R., Ohio) last Wednesday said the "extraordinary measures" the Treasury was taking to maintain its borrowing power will "be exhausted no later than Oct. 17," unless the $16.7 trillion federal debt limit is raised.

With the budget deadline having passed, hundreds of thousands of federal workers will be furloughed, although critical government services, including Social Security, air traffic control and the U.S. Post Office will continue to function. Still, the government shutdown can have quite an effect on the economic recovery. Deutsche Bank market strategist David Bianco in a note to clients on Sunday wrote that "Perhaps 0.02% of GDP is threatened every day the government is shut, likely less the shorter the closure and more the longer." That is, of course, a small daily figure, but with the U.S. economy growing at an annual rate of 2.5% according to the latest Bureau of Economic Analysis estimate, the shutdown could even affect Federal Reserve stimulus policy.

The good news for investors on Tuesday was a report from the Institute for Supply Management that its Purchasing Managers Index (PMI) for September increased to 56.2% from 55.7% in August, coming in ahead of the consensus estimate of 55, among economists polled by Thomson Reuters. The ISM said "Economic activity in the manufacturing sector expanded in September for the fourth consecutive month, and the overall economy grew for the 52nd consecutive month."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $112.12 0.00%
FB $93.24 0.00%
GOOG $643.61 0.00%
YHOO $32.52 0.00%
TSLA $220.69 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs