The stock market has largely dismissed the ongoing government shutdown so far. But that may soon change.
The S&P 500 has climbed on five of the seven trading days since it began on Oct. 1—and it’s up 0.7% over that period. The AI rally has helped the broader market dismiss the political stalemate, the tech-heavy Nasdaq Composite has jumped 1.6% this month.
But the longer the impasse lasts, the more economic risks heighten. Federal workers will soon feel the impact in their paychecks—either on Friday or Tuesday next week, The Wall Street Journal reported. If it lasts
beyond Oct. 28 full paychecks will be missed—and that’s if government employees still have jobs.
The slowing U.S. labor market could take a turn for the worse, with the White House threatening permanent layoffs. On top of that, consumer sentiment has historically suffered a “meaningful drop” during shutdowns, Deutsche Bank strategists noted Friday.
Granted, much of that threat relies on a protracted shutdown. However, markets hate uncertainty, and there is plenty of that to go around.
The Federal Reserve is also working with limited visibility. The September jobs report still hasn’t
been released and the publication of crucial inflation data remains uncertain with less than three weeks until the central bank’s next interest-rate decision.
Traders have become less confident in the chances of
two more quarter-point cuts this year in recent days, now seeing an 82% probability down from 86% a week ago, according to the CME FedWatch tool.
The Fed and markets are having to look elsewhere for economic clues. That makes next week’s bank earnings from the likes of Goldman Sachs, JPMorgan Chase, and Wells Fargo key to
understanding the health of the U.S. consumer.
While earnings season offers another distraction for markets, if the shutdown drags on for too much longer it could become impossible to ignore.
—Callum Keown
|
CONTENT FROM: BLACKSTONE
|
Build with Blackstone
|
|
|
Find out why Blackstone is investing in the picks and shovels of tomorrow—like the data centers powering AI and the logistics driving e-commerce globally.
Learn more.
|
|
|
Government Shutdown Hits Day 10 Without a Clear Offramp
Neither Democrats nor Republicans were able to get the 60 Senate votes needed to approve temporary funding and resolve their differences to reopen the federal government. A seventh vote on each of their spending proposals fell short of the required margin on Thursday.
- Republicans want to pass a continuing resolution that keeps spending at current budget levels until Nov. 21. Democrats want to fund the government through Oct. 31, but also extend the Affordable Care Act healthcare subsidies set to expire at the end of the year.
- A Harvard
CAPS/Harris poll found that 65% of Americans said Democrats should end the shutdown by accepting a bill to keep current levels of spending. The poll said 53% of respondents blame Republicans for the shutdown, while 47% blame Democrats.
- Stephen Myrow, managing partner with Beacon Policy Advisors, said it will take a more general breakdown in basic government services before the public gets angry enough to force lawmakers to resolve the impasse. That is what ended the 2018-2019 shutdown: Sickouts by air-traffic controllers that grounded and delayed flights nationwide.
- As the number of U.S. flight delays surpassed 4,600 on Thursday, Transportation Secretary Sean Duffy said that some air-traffic controllers could be fired for not coming to work. “If we have some on our staff that aren’t dedicated like we need, we’re going to let them go.”
What’s Next: Active military members could miss their first paychecks on Oct. 15. Dozens of Democrats have urged Speaker Mike Johnson to reconvene the House to approve stopgap funding, but he hasn’t committed to House members coming back to Capitol Hill next week.
—Joe Light and Janet H. Cho
The U.S. Begins Argentine Rescue. American Farmers Are Waiting.
The U.S. rescue for Argentina may not be popular here. Both the U.S. and Argentina export soybeans and compete in the global market. China isn’t buying U.S. soybeans amid the trade war with Washington, leaving American
farmers in a pinch, and they have objected to taxpayer funds being used to help a competitor.
- The final details of the rescue plan have been reached, Treasury Secretary Scott Bessent said Thursday. The U.S. directly bought Argentine pesos and had finalized plans for a $20 billion currency swap, giving Argentina access to
U.S. dollars that it urgently needs to support its rapidly weakening currency.
- Argentina’s economy is relatively small, but President Javier Milei is an ideological ally of Bessent’s. The libertarian Argentine president’s government has taken aggressive steps to curb inflation but it now faces a currency crisis, forcing Milei’s government to spend its dwindling dollar reserves defending the peso.
- The Trump administration has promised to aid farmers, but Agriculture Secretary Brooke Rollins said during Thursday’s cabinet meeting that any farm bailout would need to wait for the government shutdown to end. The Treasury didn’t respond to a request for comment on farmers’ concerns.
- Some analysts have speculated that the U.S. may require the Argentine peso to float freely as a condition of the rescue, but Bessent said Thursday that wouldn’t be the case. Argentina’s “exchange rate band remains fit for purpose,” he said.
What’s Next: Argentina has defaulted on its debt under previous governments. Bessent’s announcement didn’t detail any steps to ensure that dollars provided under the swap line would be repaid. Milei will meet with President Donald Trump on Oct. 14.
—Matt Peterson
Amazon Prime Shoppers Snapped Up Necessities, Personal Items
