What Shutdown? The gears of the federal government may have ground to a halt, but the stock market charged on, with all three major indexes marking new records on Thursday.

The Dow Jones Industrial Average rose 0.2%. The S&P 500 was up 0.1% and the tech-heavy Nasdaq Composite was up 0.4%. This was the 30th record closing high for the S&P and Nasdaq this year, and the 10th record close for the Dow.

Joe Mazzola, head of trading & derivatives strategist at Charles Schwab, notes that past shutdowns haven’t hurt stocks much. The current shutdown didn’t seem to be affecting investors, either.

As of now, it’s unclear how long the dispute will last for. The Senate didn’t hold any votes on Thursday in observance of Yom Kippur and will return on Friday.

There are few signs that the deadlock will be resolved by then. The longer the shutdown goes on for, the dicier things could get.

Mazzola adds:

Another problem is that official economic data releases will be suspended until the government reopens. Investors always closely monitor government data but it has become all the more important over the past few years given the Federal Reserve’s insistence that its rate-setting decisions are data-dependent.

That said, things were fairly quiet on the data front on Thursday. The Census Bureau would have released the August durable goods report, and the Labor Department was supposed to report initial and continuing jobless claims for last week, providing the last bit of information ahead of the September jobs report, originally scheduled for Friday morning.

Until the government reopens, economists are relying on alternative data to get a sense of the current state of the labor market, including Wednesday’s ADP jobs report and Thursday’s layoff and hiring announcements from Challenger, Gray & Christmas. So far, the alternative data suggest that the labor market is still “in a low hire, low fire, low gear mode,” writes Bill Adams, chief economist for Comerica Bank.

“Employers are reluctant to let go of workers after struggling to staff up during the post-pandemic recovery,” he adds. “But hiring intentions are down by even more, according to the Challenger report. Hiring typically picks up between September and December as retailers ramp up for the Holidays, but this year will likely see fewer jobs added than usual in this period.”

The Hot Stock: Fair Isaac Corporation +18.0%
The Biggest Loser: Equifax -8.5%

Best Sector: Materials +1.2%
Worst Sector: Energy -1.0%

According to several media reports, OpenAI employees sold around $6.6 billion worth of stock this week to a collection of private buyers. That would value ChatGPT’s parent company at around $500 billion, representing a $200 billion increase from its most recent funding round earlier this year.

The valuation bodes well for keeping the AI rally going—at least for now. It means the company can raise more money for smaller chunks of equity in future funding rounds, and sets the scene for a strong initial public offering down the line, writes my colleague, Adam Clark. He adds:

But the market should take OpenAI’s new valuation with a grain of salt. As my colleague, Martin Baccardax, notes, $500 billion is a pretty lofty price tag for a private company that’s not even 10 years old and has yet to turn a profit, providing “yet another reason for concerns over a bubble forming in both tech stocks and the broader financial markets.”

U.S. stocks have added $21 trillion in value since ChatGPT launched in 2022 as stock valuations have skyrocketed, particularly for tech stocks. There are worrisome similarities between the current AI rally and the dot-com bubble of the 2000s, which could be a problem down the line.

That said, AI does have the potential to add a lot to the broader economy, which investors hope will ultimately justify stock valuations and companies’ lavish spending on AI infrastructure.

“While it is still early, there is evidence that advances in AI and its spread to all sectors of the economy could yield at least a persistent boost to the level of productivity, and perhaps even productivity growth, if AI accelerates the discovery of new ideas,” reads a summer report from the Dallas Fed.

The BLS was scheduled to release the jobs report for September, but the release of the report will be suspended because of the government shutdown. Economists forecast an increase of 50,000 in nonfarm payrolls, after a 22,000 gain in August. The unemployment rate is expected to remain unchanged at 4.3%.

ISM is still on track to release its Services PMI for September, given that it is a report put out by a private company. The consensus call is for a 52 reading, which would match the August data.

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