Stocks dropped on Wednesday after the U.S. government shut down at midnight, raising fears of a longer-than-normal stoppage that weighs on an already fragile economy. Equities were also under pressure after the latest ADP report showed a surprise decline jobs for September.
The S&P 500 shed 0.4%, while the Nasdaq Composite lost 0.6%. The Dow Jones Industrial Average fell 86 points, or 0.2%. Markets are coming off a banner month that saw the S&P 500 rise more than 3.5%.
Data from processing firm ADP showed that private payrolls fell by 32,000 last month, well below the gain of 45,000 that economists polled by Dow Jones had estimated. This reading, which signifies the biggest drop since March 2023, takes on even greater importance now that there’s an economic data blackout because of the shutdown.
The U.S. government shut down after attempts made by the Republican-controlled Senate to secure a temporary spending bill failed on Tuesday. Democrats are hoping to use the measure to codify an extension of health care tax credits for millions of Americans.
The stock market has typically glided through previous government shutdowns — but this one could be riskier, given the slew of economic factors at play. Investors remain concerned about a slowing labor market and inflation risks as well as historically elevated stock valuations and market concentration levels.
The nonpartisan Congressional Budget Office estimated Tuesday that the shutdown will result in the furlough of about 750,000 federal employees. Trump has threatened permanent mass firings of federal workers under a shutdown, adding a new economic risk to this stoppage.
