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Is Wall Street Over Washington?

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Futures have been weaker since early in the morning as The Wall Street Journal highlighted how determined the GOP was to force a discussion on spending cuts around the debt ceiling issue. House Republicans may be willing to shut down the government, Politico said.

So why are stocks at new highs? Last week, I asked, "Whatever happened to the wall of worry?" There was a great story in Politico over the weekend about how OVER Wall Street is with Washington's drama. "The market's new attitude toward the continuing brinkmanship? Wake me when it's over," the story begins. Crisis as the new normal.

The problem is, this indifference is predicated on the idea that lawmakers go to the edge, but ultimately strike a deal. If that doesn't happen, markets will react very quickly.

Not that it matters, but the public — and the media — are still down on the stock market. I thought that now that the stock market at new highs was accompanied by significant INFLOWS into stock mutual funds as well as exchange-traded funds (the highest in years, in the first week of the year), there would at least be some commentary that the stock market was, well ... back.

What little commentary there was seemed cautious, as if signs of inflows into stocks were indicative of market tops. The Financial Times trumpeted, "Bulls take charge in equities rally" and the Journal headlines said, "Cash Floods Into Stock Funds," but even these stories were fairly short and had plenty of skepticism. The mainstream press hardly noticed.

Well, at least the hedge fund guys are paying attention. Hedge fund leverage (borrowing to buy stocks) is at a four-year high, Bloomberg reported, citing data from the NYSE-Euronext.

Now, that makes some sense. Many hedge funds — perhaps most — once again underperformed their benchmarks last year. With the bond rally looking very long in the tooth, Europe stabilizing, Japan in hyper-stimulus mode, and China showing clear signs of bottoming, it's little wonder that hedge funds are looking for an early jump on performance.

Elsewhere:

1) Global stocks are mostly higher: new highs in Portugal, Greece, Italy, the U.K., and India.

2) Investing in mainland China? Maybe. The Shanghai Index jumped three percent around speculation that the Chinese government may increase the amount of money foreign investors can invest in the country's stocks. Foreigners are currently restricted from ownership. A small program allows for foreigners to invest directly in mainland Chinese stocks currently accounts for only 1.6 percent of the Chinese stock market. That amount can increase 10 times, according to the chairman of the China Securities Regulatory Commission.

3) Earnings: Still early, but PPG, which is big in paints and chemicals, as well as coatings for autos, aircraft, and the military, reported earnings in line with estimates. More importantly, for 2013 the CEO anticipated a "solid growth bias in North America, improving growth prospects in Asia and subdued activity levels in Europe." The stock closed Friday at an historic high; they are separating their chemical business shortly.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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