U.S. stock indexes inch up
Healthcare leads S&P sectoral gains; Communication Services down most
Europe's STOXX surges >1%
Dollar, crude slip; gold edges up; bitcoin advances >2%
U.S. 10-year Treasury yield falls to ~4.12%
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LONG GOVERNMENT SHUTDOWNS TYPICALLY BUOY STOCKS
The U.S. federal government shut down on Wednesday as lawmakers failed to pass a bill to continue funding the government as Republicans and Democrats wrangled over healthcare subsidies and other issues.
While it is not yet clear how long the shutdown will last, in the past stocks have performed well during closures, including extended ones.
“Historically shutdowns haven’t had a negative impact on major financial assets. In fact, the most recent 6 shutdowns all saw the S&P 500 rise from start to finish, and the last one coincided with a huge 10% surge,” Jim Reid, head of macro and thematic research at Deutsche Bank said in a report.
“To be fair, that was driven by other factors, including (Federal Reserve Chair Jerome) Powell’s dovish pivot at the start of 2019, but it goes to show how markets simply took the shutdown in their stride,” he added.
With many government agencies closed, it will be challenging for the Fed to make monetary decisions during a void of government economic data, including the closely followed monthly jobs report.
Some analysts see that as most likely leading the U.S. central bank to take a more cautious and dovish lean on interest rates, which can boost market sentiment.
The longest federal shutdown lasted 35 days in 2018-2019, when the S&P 500 gained 10%. The second longest, at 21 days, in 1995-1996 the index returned around 0.1%, while a 16-day shutdown in 2013 saw the S&P 500 gain 3%.
A strong market performance isn’t guaranteed, however, with this shutdown differing from previous episodes in many key ways.
“There are… few good analogies to this week’s potential shutdown, as most prior experiences involved broader budget negotiations, a shutdown of only some but not all agencies, and/or a debt limit increase, which is not in play this time,” Goldman Sachs economists led by Jan Hatzius said in a note.
(Karen Brettell)
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EARLIER LIVE MARKETS POSTS
SHUTDOWN ECONOMICS: ADP, PMI, MORTGAGE DEMAND CLICK HERE
MADE IN AMERICA BUT NOT MADE BY AMERICANS CLICK HERE
SHUTDOWN'S HERE, BUT SOME CONTRACTORS STILL CASH IN CLICK HERE
OCTOBER STARTS ON A SOUR NOTE CLICK HERE
RETAIL INVESTORS REMAIN BULLISH ON AI STOCKS CLICK HERE
FIVE UP MONTHS FOR S&P: WHAT HISTORY SAYS ABOUT WHAT'S NEXT CLICK HERE
US SHARES ARE UP, NOW LOOK FOR THE IMPACT ON CONSUMPTION CLICK HERE
HEALTHCARE HELPS STOXX HIGHER CLICK HERE
EUROPE BEFORE THE BELL: WATCHING PHARMA CLICK HERE
MORNING BID: WASHINGTON GOES DARK CLICK HERE
