Not Bluffing: Shutdown Begins, Markets Hit Records Anyway
Wall Street brushed aside the U.S. government shutdown on Wednesday, sending the $S&P 500(.SPX)$ to its 29th record close of the year. The Dow Jones Industrial Average rose 43 points (0.1%), adding to Tuesday’s high, while the Nasdaq Composite gained 0.4%, finishing just shy of its all-time peak. $Tesla Motors(TSLA)$ $NVIDIA(NVDA)$
$SPX
Shutdown & Jobs Data Collision
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Stocks opened weaker after ADP reported a surprise loss of 32,000 private-sector jobs in September, versus economists’ expectations for a 50,000 gain.
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August’s figures were also revised lower, showing a small decline instead of growth.
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With official Bureau of Labor Statistics releases frozen during the shutdown, private data like ADP’s report has outsized influence, though economists warn it remains an unreliable predictor of official trends.
“The September ADP report probably will receive more attention than usual… but we still think that the ADP provides very little information of value.”
Market Context
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Rebalancing at quarter-end also helped explain the day’s gains, according to Paul Hickey of Bespoke Investment Group.
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Despite the negative jobs surprise, odds of an October rate cut rose to 100%, with markets pricing in at least a half-point in cuts by year-end.
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$Health Care Select Sector SPDR Fund(XLV)$ led the day (+3.1%), while $Communication Services Select Sector SPDR Fund(XLC)$ lagged (-1.4%).
Conclusion
Even with Washington closed for business and economic signals clouded by the shutdown, investors continue to push stocks higher. The reaction underscores two dynamics:
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Markets have largely priced in political dysfunction.
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Monetary policy hopes outweigh short-term data noise.
The real test will come if the shutdown drags on long enough to obscure several weeks of data, forcing investors and the Fed alike to make decisions with limited visibility.
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