Contracts for the S&P 500 fell 0.2% after the index had its best September in 15 years, fueled by optimism over artificial intelligence and lower rates. A gauge of the dollar edged higher after three days of losses while gold advanced, hovering around a record set Tuesday. Asian shares opened lower with China and Hong Kong closed for a holiday. Treasuries were mostly flat with the yield on the 10-year at 4.15%.
The US government hurtled toward a shutdown as Congressional Democrats and President Donald Trump dug in Tuesday on a confrontation over health-care spending. While Trump has threatened to oust federal workers, the shutdown is set to disrupt national services.
Investor focus is squarely on the looming shutdown, which also threatens to delay key economic reports used to gauge the Federal Reserve’s path on interest-rate cuts. While most standoffs end in last-minute deals, past episodes have caused enough disruption in the federal bureaucracy to force Wall Street to weigh the potential fallout for US markets.
“Things could get ugly if the shutdown creates an information vacuum for jobs and inflation data ahead of the next Fed rate decision,” said Michael Bailey at FBB Capital Partners. “Also, with stocks and valuations near prior peaks, we could see some minor bad news snowball into a correction near term.”
The latest deadlock over spending threatens to paralyze many US government operations for the first time in nearly seven years, causing the suspension of services for Americans and paychecks for federal workers. Traders are concerned that the shutdown would delay the release of Friday’s nonfarm payrolls data by the Bureau of Labor Statistics. Economic data over the past month has shown that the labor market is slowing down while inflation is relatively under control — though still above the Fed’s 2% target. Traders are still getting glimpses this week of how the labor market is faring. The JOLTS report on Tuesday showed US job openings were little changed in August while hiring was subdued, indicating that demand for workers is slowing. Wednesday’s data will provide insight on company hiring.
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