Market Surges on Word of End to U.S. Government Shutdown However More Turmoil on the Horizon

U.S Stock Market

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Stock markets surged late Wednesday upon word that U.S. lawmakers were likely to reach a deal by the end of the day to reopen the government and raise the debt ceiling.

The deal resulted in a continuing funding resolution for the government and a raise in the debt ceiling. However the solution is only temporary and will be reopened in the first quarter of 2014.

It was signed by President Barack Obama late Wednesday evening and reopens the government by funding it until January 15, 2014 and the debt ceiling until February 7, 2014.

Figures show that the Dow gained 205 points to close at 15,373, the S&P 500 gained 23 points to close at 1,721, and the NASDAQ closed 45 points higher at 3,839.

However, 10-Year Treasury Bond prices dropped just below 2% reflective of projections that the U.S. Federal Reserve will be easing on its buying of U.S. Government Bonds.

The Dow Jones had suffered a sharp drop in stock prices following the government shutdown on October 1. It began to rise somewhat sharply last weekend when rumors surfaced that Speaker of the House Rep. John Boehner might reach a continuing resolution and debt ceiling deal with the Senate.

It dropped sharply at the beginning of the week because of dissent among the conservative base of the House Republicans, the Tea Party.

The continuing resolution does not give the conservative base of the Republican Party any provisions to delay funding of Obamacare which was one of the sources of conflict between the House of Representatives and Senate.

Fitch Ratings, based in New York and London, put the United States on AAA rating watch negative on Wednesday when it became doubtful that Congressional leaders could reach an agreement on reopening the government and raising the debt ceiling.

The AAA rating is an indicator of the creditworthiness of the U.S. to pay its obligations. Even after Mr. Obama signed the resolution, AAA rating watch negative remained in effect.

Earlier, in September, economists began projecting that the Federal Reserve would begin easing on its Treasury bond buying in order to slightly shrink the U.S. dollar supply which has been affecting global markets negatively. A reduced dollar supply will likely result in higher interest rates in the near future.

Many economists see the continuing resolution and debt ceiling increase debate at the beginning of 2014 coupled with a troubled credit rating and reduction in the dollar supply an indicator of more economic stress for the U.S. in the immediate future.

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Posted by on Oct 17 2013. Filed under Featured, Finance, New. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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