The S&P 500 closed above an unprecendented level Wednesday, driven by optimism that the economic impact of the government shutdown is likely to be limited and hopes for further rate cuts were boosted following a slump in private jobs.
At 4:00 p.m. ET, the Dow Jones Industrial Average rose 43 points, or 0.1%, while the S&P 500 index gained 0.3% to closing record of 6,708.06, and the NASDAQ Composite added 0.4%.
U.S. government shutdown economic impact to be limited
A government shutdown has begun after a Republican-backed bill to fund the government failed to gain a majority in the Senate.
Senate Democrats almost unanimously opposed the Republican spending bill, calling for the inclusion of continued healthcare subsidies in the legislation.
The bill – which was earlier this month approved by the House of Representatives – was rejected in a 55-45 vote. The bill required at least 60 “yes” votes to be approved.
Services ranging from air traffic control to disaster relief are expected to be impacted, while thousands of federal employees face potential furloughs.
But Wall Street remains optimism that the shutdown is unlikely to leave big dent in the economy
"History suggests that a government shutdown lasting up to a few weeks ultimately will have limited economic and financial market impact after both respond to the government’s eventual reopening," Wells Fargo said in a recent note.
Others warn against complacency as this shutdown comes just as investors remain concerned about a slowing labor market and more federal layoffs can only add to the worries.
"It may be dangerous for investors to base their expectations of how assets will react on the events of the previous shutdown. This would assume there is no potential for downward movement in stocks and bond yields amid a weaker economy, and lends a false sense of complacency in the case of an extended shutdown," said Peter Corey, Co-Founder and Chief Market Strategist of Pave Finance.
Rate-cut bets jump after further weakness in job market
Treasury yields fell as bets on further Fed rate-cuts were supported by data showing the largest decline in U.S. private payrolls in two-and-a-half years during September.
Companies shed 32,000 jobs last month, the biggest drop since March 2023, while August’s numbers were also revised lower, to show a loss of 3,000 jobs compared to the initially reported gain of 54,000 positions.
This release has taken on additional market importance as the U.S. government shutdown is likely to delay the release of the widely-watched nonfarm payrolls release for September, due on Friday.
Investors would have been looking to the payrolls print to provide more definitive cues on the labor market – whose cooling was a major motivator of the Federal Reserve’s September rate cut.
“The key for investors will be whether the next nonfarm payroll report, expected this week, is delayed due to a shutdown. If so, this could spare the market the potential of seeing August’s 22,000 payroll number sink below zero, as is likely given the statistics are already dangerously close. A delay would postpone any investor disappointment and give the market a chance to release more positive data in the interim to soften the impact," added Corey.
Nike turnaround makes progress; Intel reportedly mulls AMD manufacturing deal
In the corporate sector, Nike (NYSE:NKE) stock rose after the sportswear giant released stronger than expected first-quarter results, suggesting its turnaround effort is making progress despite weakness in China and tariffs pressuring margins.
The footwear retailer reported quarterly profit above Wall Street expectations after the close Tuesday, helped by stronger wholesale revenue.
Nike reported a surprise rise in first-quarter revenue in a sign of early success for CEO Elliott Hill’s plan to get Nike back to its former glory.
Netflix (NASDAQ:NFLX) stock dropped after billionaire entrepreneur Elon Musk, CEO of Tesla, called on his followers to cancel their subscriptions to the streaming service.
"Cancel Netflix for the health of your kids," Musk wrote on his social media platform X, responding to a post that accused the company of promoting a transgender agenda.
Conagra Brands (NYSE:CAG) stock rose after the packaged food giant beat expectations for quarterly earnings, despite ongoing challenges from inflationary pressures and a cautious consumer.
Intel Corporation (NASDAQ:INTC) surged more than 7% after a Semafor report suggested that the chipmaker was in early discussions to add AMD as a customer at its factories.
Source :
https://www.investing.com/news/stock-market-news/us-stock-futures-dip-as-govt-shutdown-appears-imminent-4264895
