Stocks Muted After U.S. Government Shutdown -- Update

U.S. stocks rise after government shuts down

-- Banks lead European stocks higher

-- Dollar extends recent decline

Global markets showed a muted reaction on Monday as a U.S. government shutdown was poised to stretch into a third day.

The Dow Jones Industrial Average added 34 points, or 0.1%, to 26106. The S&P 500 rose 0.3% and the Nasdaq Composite advanced 0.4%, with both indexes heading toward fresh record closes.

U.S. government bonds were little changed, while the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, inched down 0.2%.

Lawmakers Sunday failed to end the shutdown which began after the Senate rejected a one-month spending bill. The Senate is expected to hold a procedural vote at noon Monday on a measure that would keep the government funded through Feb. 8, but it isn't clear if it will have enough support to advance.

While the shutdown could sideline significant numbers of federal employees and government contractors and potentially dampen quarterly growth figures, many investors said it is unlikely to disturb the robust global economy that has powered stocks and tempered volatility.

"The market is taking a slight pause here," said Larry Hatheway, group chief economist at GAM Holding, "but it's a little hard to see lasting economic impacts or even particularly durable market impacts from previous shutdowns."

In the seven other shutdowns that occurred in the past 35 years, the S&P 500 on average rose in the week leading up to the shutdown and then subsequently slipped four of seven times, with declines averaging 1% over a three-day period, according to Sam Stovall, chief investment strategist at CFRA Research. However, the S&P 500 then took less than two weeks to get back to break-even, he noted.

Others said it is unlikely to become a real source of volatility unless debt ceiling concerns escalate, but that won't happen until around March.

Broad gains across sectors helped offset a decline in shares of industrial and materials companies on Monday.

Shares of energy companies in the S&P 500 rose 0.8%, following U.S. crude oil prices higher. Halliburton Co., Noble Energy Inc. and Schlumberger NV added more than 2% apiece.

Reports of corporate deals swung individual stocks, with Sanofi shares falling 3.8% after the French drugmaker said Monday that it would buy hemophilia drugmaker Bioverativ Inc. for more than $11.5 billion.

Elsewhere, the Stoxx Europe 600 edged up 0.2%, boosted by a rise in bank shares.

Shares of UBS Group lagged behind, however, falling 1.2% after the Swiss bank said charges related to the U.S. corporate tax overhaul pushed it into a fourth-quarter loss.

Earlier, Asian stocks showed little reaction to the partial U.S. shutdown. Japan's Nikkei Stock Average was flat while Hong Kong's Hang Seng Index rose 0.4% to another record close.

Shares of some Apple suppliers declined across the region, however, dragging down some tech-heavy indexes.

South Korea's Kospi fell 0.7% amid a 2.2% drop in shares of index heavyweight Samsung Electronics. The company's stock fell against a backdrop of increased caution over demand for rival Apple's most expensive iPhone.

Kenan Machado and

Harriet Torry

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

January 22, 2018 11:05 ET (16:05 GMT)