U.S. stock index futures fell sharply Wednesday as the U.S. government shut down after Congress failed to approve more funding for federal agencies.
At 05:35 ET (09:35 GMT), Dow Jones Futures fell 205 points, or 0.4%, S&P 500 Futures dropped 38 points, or 0.6%, and Nasdaq 100 Futures slipped 156 points, or 0.6%.
The major indices closed higher Tuesday, despite the impending shutdown, with investors enjoying an unusually strong trading month in September. The third quarter, which ended on Tuesday, saw the broad-based S&P 500 log a gain of 7.8%.
U.S. government shutdown begins
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.
Wall Street typically pushes higher during government shutdowns, with stocks having on average risen in the five previous government shutdowns.
But this one could be more troublesome than usual given investors remain concerned about a slowing labor market and more federal layoffs can only add to the worries,
ADP employment report due
One of the important consequences of the U.S. government shutdown is the likely delay of a hotly anticipated labor market reading on Friday - the widely-watched nonfarm payrolls release for September.
Investors would be 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.
Dallas Fed President Lorie Logan flagged heightened caution over future interest rate cuts, stating on Tuesday that the labor market will need to deteriorate further for the central bank to consider more rate cuts.
The ADP National Employment Report is due later in the session, and is expected to show a modest gain of 50,000 private-sector jobs in what could be the last piece of labor market data to be released for some time.
Nike turnaround makes progress
In the corporate sector, Nike (NYSE:NKE) stock rose premarket 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.
Results from packaged foods giant Conagra Brands (NYSE:CAG) are the highlight of Wednesday’s earnings slate.
Crude falls again
Oil prices fell Wednesday, adding to two days of declines as investors weighed OPEC+ plans for a larger output hike next month and the outcome of a U.S. government shutdown that could impact economic activity and fuel demand.
Brent futures slipped 0.8% to $65.49 a barrel, and U.S. West Texas Intermediate crude futures fell 0.9% to $61.81 a barrel.
On Monday, Brent and WTI both settled more than 3% lower, their sharpest daily declines since August 1. On Tuesday, they each fell 1.5% further.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, could agree to raise oil production by up to 500,000 barrels per day in November, triple the increase made for October, Reuters reported earlier this week.
Spot gold hit a record high of $2,875.53 an ounce earlier in the session, while gold futures for December hit a peak of $3,903.45/oz, as the U.S. government shutdown prompted more flows into the safe haven.
Source :
https://www.investing.com/news/stock-market-news/us-stock-futures-dip-as-govt-shutdown-appears-imminent-4264895
