U.S. stock investors, hoping to leave politics aside to focus on fundamentals, aren't getting their wish as lawmakers battle over raising the debt ceiling.
Proof that political uncertainty was holding down markets was seen Thursday and Friday as the S&P 500 generated two days of strong gains in advance of the weekend.
Legislators will be busy negotiating raising the $16.7 trillion federal borrowing limit and reopening the federal government. If the borrowing cap is not increased by Oct. 17, it could lead to a U.S. debt default.
The government has been partially shuttered since Oct. 1.
The shutdown has lasted longer than many expected, and while proposals from both President Barack Obama and congressional Republicans have been viewed as signs of progress, a final agreement remains elusive.
"If we see a deal over the weekend, the market will trade back to where it was before all this concern settled in, near all-time highs,'' said David Joy, chief market strategist at Ameriprise Financial in Boston. "Otherwise we'll probably fall back to 1,650, possibly further, depending on how rancorous the disagreement is.'"
Increase in volatility
The S&P 500 is above its major moving averages, which could serve as support in the case of a market decline. The benchmark index is 0.9 percent above its 50-day moving average of 1,678.22, and 1.8 percent above its 100-day average of 1,662.53.
Many analysts have forecast increased volatility the longer the market goes without a deal. The CBOE Volatility index spiked this week above 20 for the first time since June. Trading in VIX futures suggested more concern about the near-term market trend, as well.