Markets Resilient as US Government Shutdown Continues, Investors Eye Fed Action and Q3 Earnings
Markets Resilient as US Government Shutdown Continues, Investors Eye Fed Action and Q3 Earnings
U.S. stock futures showed little movement early Thursday, indicating a resilient market despite the ongoing government shutdown. This comes after the S&P 500 achieved a fresh record high on Wednesday, with investors seemingly undeterred by the federal funding impasse.
The major U.S. stock indexes closed higher on Wednesday, buoyed by hopes for a swift resolution to the shutdown, which began after Democrats and Republicans failed to reach a funding agreement by Tuesday’s deadline. Lawmakers remain at odds, with Democrats insisting on extending healthcare tax credits.
As the shutdown progresses, with the Senate out of session today for Yom Kippur and expected to reconvene Friday, the duration of the stalemate is a key concern for investors. While some predict a short shutdown, others on prediction markets are betting it could extend for nearly two weeks.
Market analysts, including Dan Niles of Niles Investment Management, believe that while some near-term choppiness is possible, other factors will ultimately drive markets higher. Niles points to anticipated strong Q3 earnings, sustained AI sector enthusiasm, and expected Federal Reserve rate cuts later this month (October 29th) as primary catalysts.
The shutdown has already impacted economic reporting, leading to a blackout of crucial data, including the delay of Friday’s September nonfarm payrolls report. Despite this, the Federal Reserve is still widely expected to announce an interest rate cut at its upcoming October meeting, influenced by recent private payroll data reflecting a drop last month.
Historically, government shutdowns have had minimal impact on the stock market. However, current elevated market valuations, concentration levels in the AI-led rally, and ongoing inflation concerns are prompting investors to monitor this shutdown more closely than previous instances.
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