Why the Stock Market Continues Afloat
Why the Stock Market Continues Afloat
The US stock market concluded a strong week with major indices reaching fresh all-time highs despite an ongoing government shutdown and mixed economic signals. The primary catalyst driving gains was growing expectations for Federal Reserve interest rate cuts, amplified by the absence of official government economic data.
Data Blackout Ironically Boosts Markets: The ongoing US government shutdown is producing a counterintuitive market effect. The absence of the crucial monthly jobs report and other official economic indicators has increased investor confidence in potential Federal Reserve rate cuts this month. With government data unavailable, markets are relying heavily on private-sector indicators like the ADP report, which showed the private sector shed 32,000 jobs in September—a figure that reinforced rate-cut expectations.
Extended Shutdown Risks: While stocks have largely dismissed the shutdown thus far, a prolonged impasse poses escalating risks and leaves the Federal Reserve “flying blind” when making critical monetary policy decisions.
Economic Data Reveals Sticky Inflation Amid Service Sector Weakness: ISM Services Index Hits Breakeven: The Institute for Supply Management (ISM) services sector gauge fell 2 percentage points to 50% in September—the precise threshold between expansion and contraction—missing economists’ forecast of 51.7%.
Critical Service Sector Shows Strain: Business activity within the services sector, which comprises over two-thirds of US economic output and roughly 65-70% of the CPI basket, declined to 49.9%, entering contraction territory for the first time since May 2020. The employment sub-index also remained contractionary at 47.2%, signaling continued labor market softness.
Inflation Pressures Remain Elevated: Despite the activity slowdown, the “prices paid” component—measuring input costs for materials and services—increased to 69.4%. This elevated reading suggests inflation, particularly within the services sector. This dynamic presents a challenging scenario: weakening activity coupled with persistent price pressures.
Cryptocurrency Market Extends Rally: Bitcoin as one of the five key indicators tracked for premium subscribers approaches to record territory and hovering above $123,000 per token so far, reflecting continued institutional interest and favorable market sentiment.
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