The US government is hurtling toward a shutdown as Democrats seek to use what little power they have to force Republicans to undo significant cuts to healthcare made by Donald Trump’s tax-and-spend bill. The standoff seemed to harden on Tuesday as the deadline drew near. While last-minute deals are always possible, what does a shutdown mean for investors, and what are the implications for US financial markets?

The main macro implications lie in the labor market and predictions for the path of interest rates. The Trump administration is threatening mass firings of federal workers, which if true would add to the tens of thousands of people it already fired this year and send jobless claims rising even higher in a troubled job market. As for those other markets, a shutdown that lasts could finally stick a pin in the extended bull run, which as in previous years seems untethered to reality. Here’s what to watch for if that shutdown reality bites. –Jordan Parker Erb

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Even without a shutdown, the labor market continues to be a downer for Americans. Consumer confidence fell in September to a five-month low on growing concerns about job prospects and the broader economy. The Conference Board’s gauge of confidence decreased 3.6 points to 94.2, data released Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 96. And for a second month, there are now slightly more unemployed people than there are jobs available. The last time that happened was in early 2021, when the economy was clawing its way out of the pandemic.

A separate report on Tuesday from the US government showed job openings to be little changed in August while hiring was subdued, suggesting gradually ebbing demand for workers. The data from the Bureau of Labor Statistics said the hiring rate last month edged down to 3.2%, the lowest since June 2024, while layoffs were little changed at a low level.

A Republican-appointed federal judge handed down a blistering decision on Tuesday condemning Trump and his administration for trampling the free speech rights of foreign students and academics expressing their political views. While Trump was in Virginia at a meeting with generals urging them to use American cities as a “training ground,” US District Judge William Young in Boston said Secretary of Homeland Security Kristi Noem and Secretary of State Marco Rubio and their subordinates acted together “to misuse the sweeping powers” of their offices to target pro-Palestinian non-citizens “primarily on account of the First Amendment protected political speech.” They did so to “strike fear” into other non-citizens backing Palestinian rights, the judge said.

People gather outside the US Immigration and Customs Enforcement headquarters in April to protest the deportation of a Columbia University graduate student who the Trump administration targeted over anti-war campus protests. Photographer: Pete Kiehart/Getty Images

Separately, a US citizen sued the federal government alleging he was improperly arrested and detained twice by immigration agents as they unlawfully targeted Latino workers at Alabama construction sites, despite providing them with his proof of legal status. It’s the latest case to accuse the administration of illegally detaining people based on the fact that they appear to be Latino or are located in certain places, such as construction sites—as opposed to specific evidence that they lack legal status to be in the country. However, a recent US Supreme Court ruling for the administration appeared to open the door to racial profiling, legal experts said.

Millennium Management is the latest Wall Street firm to be hit by the sudden unraveling of the auto-parts supplier First Brands. An investing team at Millennium led by Sean O’Sullivan is said to have taken a writedown on a First Brands bet as the supplier slid toward bankruptcy. The loss is expected to total about $100 million. First Brands filed for Chapter 11 protection on Sunday night in Texas after weeks of concern about the company’s use of opaque, off-balance-sheet financing to manage its network of auto-parts brands.

Trump son-in-law Jared Kushner brokered the initial connection between Electronic Arts and Saudi Arabia’s Public Investment Fund that ultimately led to a record-breaking $55 billion buyout deal. Kushner is said to have acted as a central figure in the talks for months, pushing to keep the momentum going when it slowed around mid-year.

Kushner’s involvement in the deal adds to the dense tangle of business relationships between wealthy Gulf states and Trump’s family, and the ever-growing number of questions over the billions of dollars in deals involving Trump and his family during his presidency.

Pfizer secured a three-year grace period from Trump’s promised tariffs on pharmaceuticals in a deal that would lower some of the company’s US drug prices, Chief Executive Officer Albert Bourla said. Pfizer will sell some drugs at a 50% average discount on a direct-to-consumer website called TrumpRx, an initiative intended to allow Americans to pay for prescriptions at discounted rates negotiated by the government.

It’s the latest example of the transactional nature of winning tariff exemptions from Trump, who has unilaterally wielded trade policy in potentially illegal fashion to exert power over multiple industries. (His “reciprocal” tariff strategy has been ruled illegal by a federal court for now.) As recently as last week, Trump threatened 100% tariffs on the pharma industry. And this week, he cited national security to put levies on wood.

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