Wall St eyes Washington standoff with stocks near records

NEW YORK, Oct 5 (Reuters): The US government shutdown tops investors' agenda next week as markets head into the seasonally strong fourth quarter, with equities near record highs bracing for an earnings-season test later this month.

A deep partisan rift in Washington led to a federal government shutdown that risks delaying crucial economic data and could potentially muddy the Federal Reserve's policy-easing outlook.

Few on Wall Street expect the Washington impasse to derail a rally that has lifted the S&P 500 by 14 per cent to repeated record highs, but with little in the way of major data or earnings, the Capitol Hill drama is set to dominate investor focus.

"The shutdown and the potential reopening ... that's going to get almost all investor attention," said Mark Hackett, chief market strategist at Nationwide.

Investors' main worry is that the shutdown will suspend the flow of timely economic data.

Should the data drought last several weeks, it could cause confusion about the Fed's monetary policy path, as the central bank will be without government data that helps guide its decisions. It also poses a possible drag on economic growth the longer it extends.

But for now, there is little reason to panic, investors said.

Despite some softness in labor data, the US economy has borne the onslaught of trade and tariff headlines well and corporate earnings have supported stocks' march higher.

Analysts as of Thursday expected earnings from S&P 500 companies to increase 8.8 per cent in the third quarter from a year ago, according to LSEG data.