US Government Shutdown Imminent: Markets Brace for Volatility as Midnight Deadline Nears
US Government Shutdown Imminent: Markets Brace for Volatility as Midnight Deadline Nears
U.S. equities saw declines on Tuesday, September 30, as a potential government shutdown loomed with a midnight deadline fast approaching. Despite today’s dip, Wall Street is poised to conclude September with an unexpectedly strong performance.
The S&P 500 dropped 0.2%, while the Nasdaq Composite slid 0.4%, and the Dow Jones Industrial Average shed 43 points. Investors are particularly cautious this time around, citing concerns over a slowing labor market, the specter of stagflation, and elevated stock valuations. A shutdown could also prompt credit rating agencies to re-evaluate U.S. credit, following Moody’s downgrade in May.
Political leaders expressed little optimism for a last-minute resolution. House Speaker Mike Johnson (R-La.) told CNBC he was “skeptical” a deal could be reached, placing the onus on Senate Minority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.). Jeffries, in turn, stated that a shutdown would be the Republicans’ decision.
A federal government suspension would have immediate consequences for economic reporting. The Labor Department confirmed that the crucial September nonfarm payrolls report, scheduled for release on Friday, would be delayed. This comes as September’s consumer confidence reading already fell short of expectations, adding to pre-Federal Reserve October policy meeting anxieties.
Exacerbating market jitters, former President Donald Trump recently threatened mass firings of federal workers in the event of a shutdown. Experts like Jack Janasiewicz of Natixis Investment Managers warn that a shutdown could trigger “tangential effects” on near-term market sentiment and volatility, particularly if delays in economic data collection heighten uncertainty. While a lasting economic impact is deemed unlikely unless the shutdown is prolonged, the immediate risk of increased financial market volatility remains high.
Despite the current uncertainty, major U.S. stock indexes are concluding a robust September. The S&P 500 has gained 2% this month, significantly outperforming its typical September average. The Dow has risen 1%, and the Nasdaq leads with a 4% gain for the month, setting the stage for strong third-quarter closes across the board.
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