Shutdown Cloud Continues to Hang Over Wall Street

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

The U.S. government shutdown isn't letting traders rest easy this week. The U.S. markets dropped sharply this morning, with the Dow Jones Industrial Average and the S&P 500 down 0.75% and 0.7%, respectively, as of 10:05 a.m. EDT, continuing this week's slow decline.

The Department of Labor said jobless claims rose just 1,000 this week to 308,000, a sign that businesses aren't cutting back due to a slow economy or the government shutdown. Jobless claims are essentially a reading of layoffs at existing companies.

Globally, there doesn't seem to be a lot of concern about the shutdown or a default on U.S. debt. European shares are mixed today, and Asian stocks rose after China's nonmanufacturing Purchasing Managers' Index rose to a six-month high of 55.4. The PMI is a gauge of confidence, and any reading above 50 indicates expansion, so this is a small indicator that China's economy may continue to expand in the near future.  

In commodities, oil is down about 0.5% and is rapidly approaching $100 per barrel again. In the past, that would mean that more money would be flowing overseas, but net imports of oil in the U.S. are down from 60.3% of consumption in 2005 to just 35.3% in the first eight months of this year. The Wall Street Journal even said yesterday that the U.S. will soon overtake Russia as the largest oil and gas producer in the world. 

Shale oil and gas production, along with major offshore drilling discoveries in the Gulf of Mexico, have fundamentally changed the U.S. oil picture, and it's having a positive impact on imports and the broader economy. Look at energy as a key driver of the economic recovery and a big reason the trade deficit is declining in the long term.

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