Stocks rode the D.C. seesaw last week as the broad
market fell, rose, and ultimately finished flat on the week amid daily, if not
hourly, conflicting comments from senior political leaders. Large-company share
prices, however, dropped more than 1% for the week.

With
the third-quarter-earnings reports season not beginning until this week,
investors remain fixated on the partisan battle over the federal budget and the
government’s need to raise its debt-ceiling authority. As of Friday, the
partial government shutdown was in its fourth day.

The
market’s rebound on Friday demonstrated how closely investors were watching
Washington, as stock prices rallied on media reports suggesting that Speaker of
the House John Boehner was perhaps more flexible than previously thought in
working to increase the U.S. debt limit before the estimated Oct. 17 deadline.
Technically, in the event that deadline isn’t met, the federal government
probably wouldn’t run out of money until the end of the month.

The
Dow Jones Industrial Average lost 186 points, or 1.2%, to 15,072.58, a second
consecutive weekly drop. But the S&P 500 index finished essentially
unchanged at 1690.50. The Nasdaq Composite index bucked the trend, rising 0.7%,
or 26 points, to 3807.75.

“It
was a manic-depressive market,” says Paul Nolte, a portfolio manager with
Dearborn Partners. There’s hope of a handshake on the debt ceiling, but the
competing sound bites from Democrats and Republicans aren’t helping, he says.

With
shares off just about 2% from highs, the market hasn’t reacted much to the
stalemate, he adds, and certainly less painfully than the 10%-plus slide back in
August 2011. That’s when Standard & Poor’s downgraded U.S. debt amid the
wrangling over lifting the ceiling. As things stand, the debt ceiling is more
pressing than the budget (Source: 
Barrons Online).