It's starting to sink in: the shutdown could last until a debt ceiling deal, which means a couple of weeks.
I noted on Tuesday that there was a "crazy optimism" that some kind of deal could be struck that would roll up the continuing resolution with an extension of the debt ceiling...the problem is it would require a one or two week continuing resolution to enable enough time to negotiate a more comprehensive deal.
But even the ability to agree on a one or two week continuing resolution is now in doubt. Shut the government for two weeks? That could shave 0.2 percent to 0.4 percent off of gross domestic product (GDP), and when you are dealing with two percent growth, every 0.1 percent counts.
You can see the short-term stress in the T-bill market: 1-month bill yield 0.10 percent, the 3-month 0.01 percent, and 6-month 0.05 percent. In other words, the bond market seems to be saying there is considerable short-term risk, but much less longer-term risk.
One thing's for sure: the longer this goes on, the more likely the Federal Reserve will delay tapering. Boston Fed President Eric Rosengren is speaking today, as is St. Louis Fed President James Bullard, and Fed Chairman Ben Bernanke speaks at the same conference as Bullard in St. Louis, though he is not taking questions.
1) Several brand name IPOs priced last night. Burlington Stores (BURL), owner of the Burlington Coat Factory retail chain, priced 13.33 million shares at $17, above the price talk of $14-$16. That's a nice windfall for insiders, who own it at an average price of $9.27. The principal shareholder is Bain Capital (they own 54.4 m shares, almost 75 percent of the company), which took control of the company in 2006.
One downside: the company is highly leveraged. Burlington paid a special cash dividend of $336 million to shareholders (we're talking mostly Bain) in February 2013 financed from the proceeds of a $350 million notes offering.
Real estate brokerage ReMax priced 10 m shares at $22, above the price talk of $19-$21. They may be a tad late to the real estate recovery: rival Realogy is up over 60 percent since its IPO a year ago. RIHI owns 21.2 m shares.
But the biggest deal is a disappointment: Empire Realty Trust (ESRT), which owns 18 office properties including the Empire State Building, priced 71.5 m shares at $13, the low end of the price talk of $13-$15. That's a big shadow over the deal...what happened?
There have been well-publicized disputes between the Malkin family and other investors who opposed the IPO, arguing it gave the family too large a stake in the new company. That could have been a factor in the appetite for shares, particularly from institutional shareholders.
Another issue: REIT stocks in general have suffered on concerns about higher interest rates, as it affects underlying net asset value. Finally, rents have been going up recently, so there may not be as much room for rent increases.
2) Italian stocks up one percent as Premier Enrico Letta won a confidence vote in Parliament today. Former Prime Minister Silvio Berlusconi, in an apparent about-face, announced he will support the current government, most likely because his deputies have been deserting him.
—By CNBC's Bob Pisani