Stocks Slide as Economic Angst Brews Amid Shutdown: Markets Wrap
(Bloomberg) — The final stretch of a risk-off week saw stocks hit by a tech rout as worries about weakening in key areas of the economy lifted bonds. Crypto bounced after a plunge that left the asset class barely up for 2025.
Equities were poised to halt a string of weekly gains, with the S&P 500 falling almost 1% Friday as consumer sentiment sank to near the lowest on record, adding to anxiety caused by the US government shutdown. Things were even worse for the Nasdaq 100 as a selloff in artificial intelligence left the gauge on track for its worst week since April – when it entered a bear market.
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Sentiment among American consumers soured as the shutdown weighed on the economic outlook while high prices worsened their views about personal finances. Fears about unemployment jumped, with 71% of respondents in the University of Michigan reading expecting it to rise in the year ahead.
As federal agencies publishing economic data went dark, the US payrolls report was not released this Friday. A survey conducted by 22V Research showed that a labor-market unwind is the biggest risk to trading, which explains why risk assets and bond yields have been unusually sensitive to any news on that front.
“The government shutdown creates further risk because the longer it continues, the more its impact will be felt on Main Street,” said David Russell at TradeStation.
That’s all unfolding at a time when worries about AI high-flyers reaching unsustainable levels hit the market after a torrid surge spurred calls for a breather. Technical indicators started flagging reasons for caution while Wall Street chief executives have warned about a frothy market.
“This week’s dip looks more like a purge of froth than a crack in the fundamentals, along with a reality check for the AI momentum trade stretched against growth worries and lofty valuations,” said Mark Hackett at Nationwide.
The S&P 500 tested its 50-day moving average. The Nasdaq 100 slid 1.2%. Microsoft Corp. was set for its longest slide since 2011. Nvidia Corp.’s Jensen Huang said his company is blocked from selling AI chips to China for now. A closely watched volatility gauge topped 20.
The yield on 10-year Treasuries slid one basis points to 4.07%. The dollar dropped 0.2%. Bitcoin rose 1.5% Friday, trimming this week’s tumble to 7%.
Prospects are swiftly fading on Capitol Hill for a deal this week to end the longest government shutdown in US history despite warnings of worsening flight disruptions and mounting concerns about food aid for low-income Americans.
“While there is no jobs report Friday due to the government shutdown, there is enough private payroll and layoff data to suggest that the labor market is cooling,” said Glen Smith at GDS Wealth Management. “This cooling keeps the Fed’s rate cut plans alive for December and potentially into early 2026.”
The economy remains on an upward trajectory even if economic growth slows toward trend levels in 2026, according to Seema Shah at Principal Asset Management.
“The bigger concern — and the key focus of the Fed’s debate — will be the health of the labor market,” she said. “The Fed will continue to implement rate cuts to prevent any weakness in employment from accelerating. Much of the market’s optimism hinges on the assumption that policymakers will maintain some level of support.”
BlackRock Inc. executive Rick Rieder, who is among those being considered to succeed Federal Reserve Chair Jerome Powell, said the labor market is softening and interest rates should be lowered to 3%.
“We have a softening of the labor market that is quite significant,” Rieder told Bloomberg Television. “If we had the number today, I think it would have been reflective thereof.”
Read: When Fed Gets Jobs Data, It Won’t Make December Rate Call Easier
In recent weeks, Target Corp. announced plans to eliminate 1,800 roles, or about 8% of corporate jobs in its first major restructuring in years. Amazon.com Inc. said it would slash 14,000 corporate jobs — following a warning from its CEO that AI will shrink the company’s workforce — while Paramount Skydance Corp. axed 1,000 workers. Other companies cutting corporate jobs include Starbucks Corp., Delta Air Lines Inc., CarMax Inc., Rivian Automotive Inc. and Molson Coors Beverage Co.
The government shutdown has reduced visibility around labor-market conditions at a time when Fed officials have become more divided over the next appropriate policy step, noted Jennifer Timmerman at Wells Fargo Investment Institute.
“We see a wide range of factors contributing to slowing job growth. Among them: moderating economic activity, a general unwind of pandemic-era labor hoarding, lingering tariff uncertainty, worker shortages in immigration-dependent industries, and federal cost cuts in the government sector,” she said.
Still, Timmerman believes that the available data remain consistent with her firm’s constructive economic outlook for 2026 from a soft patch at the turn of the year.
“We look for policy-related tailwinds already in the pipeline — including tax cuts, monetary stimulus, and deregulation — to spur a reacceleration of economic growth beyond the early part of next year,” she concluded.
Fed officials had to make their latest interest-rate decision without key economic statistics thanks to the US government shutdown. The data they will receive when the government reopens probably won’t make the next decision any easier.
With each day passing, there’s an increasing chance some October data on jobs and prices may not be released at all. The uncertainty will prolong a debate among Fed officials about whether the labor market is really weakening fast enough to warrant another rate cut in December amid ongoing inflation risks — a question over which they’re already split.
“With the labor market softening in some areas, we expect the Fed to cut interest rates at their December meeting,” said Chris Senyek at Wolfe Research. “As the US government shutdown continues, once it reopens, we see a negative payrolls print as a key risk for markets over the coming months.”
While not his base case, in this scenario, Senyek expects markets to view the Fed as “behind the curve”, especially if the central bank decides to hold rates steady in December.
“The labor market’s cushion is getting thinner. And a thinner labor cushion means: Slower consumer spending, more pressure on consumer credit, higher sensitivity to tight financial conditions, and earnings multiple expansion get harder to justify,” said Kenny Polcari at SlateStone Wealth.
For Wall Street, this means that if the labor market begins showing real cracks, the multiple expansion story for growth stocks becomes a lot more vulnerable, he said.
“In short: good earnings alone won’t carry the market if investor confidence in the labor market wanes,” he concluded.
Despite the the anxiety that roiled riskier assets in recent days, flows remain supportive for stocks.
US equity funds had an eighth consecutive week of inflows, the longest streak this year, but cash attracted the bulk of inflows, Bank of America Corp. said citing citing EPFR Global data.
“Major indices are facing selling pressure this week,” said Craig Johnson at Piper Sandler. “Investors should prioritize good risk/reward setups, potentially after a healthy pullback within this bull market.”
Traders are pondering a moment of weakness embedded in a multi-month rip higher for stocks, yet the market on balance looks poised for further gains, said Goldman Sachs Group Inc.’s Tony Pasquariello.
“I’m not saying that risk/reward is overly compelling, nor that this is an ideal location to add a bunch of incremental risk,” he said this week. “Looking forward, I’d argue the balance of risks still points in favor of the bulls.”
With the S&P 500 testing its 50-day moving average, the set-up is for a bounce here into next week, according to Dan Wantrobski at Janney Montgomery Scott.
“However, be careful because the most recent series of new all-time highs were each met with lower highs in momentum,” he noted. “This suggests that buying power was waning into the September-October, which can likely precede reversals both major and minor in scope.”
At this time, he’s still watching for a correction within the magnitude of 5% to 10% before the year is over.
For now, Louis Navellier at Navellier & Associates notes that dip buyers seem to be waiting for a firm bottom to form.
“The ace in the hole here is the strong earnings season,” said the Wall Street veteran. There is a distinct possibility that we will look back at the current S&P 500 value “as a true buying opportunity before year-end.”
Corporate Highlights:
Airlines across the US have canceled flights scheduled for the coming days, as the longest government shutdown in history snarls up air travel and forces thousands of passengers to change their travel plans. Apple Inc.’s streaming service went down briefly for some users Thursday night shortly after the debut of the widely anticipated Pluribus, a new series from the creator of Breaking Bad. Tesla Inc.’s Chief Executive Officer Elon Musk said he expects China to fully approve the carmaker’s advanced driver-assistance capabilities that are similar to those marketed as Full Self-Driving in the US. Boeing Co. is plowing more than $1 billion into its 787 Dreamliner factory complex in South Carolina, aiming to double monthly production as sales surge for its advanced widebody jet. KKR & Co. disclosed that it will take a charge to pay back fees on an Asia private equity fund after it underperformed, sending the company’s shares slumping Friday despite quarterly earnings that beat expectations. PNC Financial Services Group Inc. lifted its planned investment in branches once more as the bank chases deposits in the fastest-growing US markets. Comcast Corp., owner of the European pay-television service Sky, is in talks to buy ITV Plc’s media and entertainment arm in a deal that would dramatically shake up the UK broadcasting landscape. Constellation Energy Corp., the biggest US nuclear-plant owner, has been hinting for months about building new reactors — and investors are starting to show signs of impatience. First Brands Group won access to $600 million of remaining bankruptcy financing, which company lawyers said was needed to prevent the company from immediately shutting down. Sweetgreen Inc. cut its full-year outlook after third-quarter results unexpectedly worsened, with the salad chain citing stubbornly weak demand. Six Flags Entertainment Corp. cut its outlook for a second time this year and took a $1.5 billion charge on its third-quarter results after overestimating the performance of its parks. Wendy’s Co. sales beat estimates by declining less than expected in the third quarter, the latest example of fast food outpeforming as cash-strapped consumers cut back on spending. Intellia Therapeutics Inc. shares dropped after the company said a patient died after suffering liver damage in a clinical trial for the company’s gene-editing treatment. A little-known Cigna Group subsidiary that sells generic drugs charges prices that skew higher than many competing suppliers, according to a new analysis that raises questions about the company’s role in setting medication prices. Brookfield Asset Management said its third-quarter earnings reached an all-time high amid record fundraising and deployment of capital, particularly within its infrastructure, transition and credit businesses. British Airways parent IAG SA said its all-important North Atlantic route experienced some weakness in the third quarter, weighing on earnings that missed estimates and causing the stock to drop the most since April. Banca Monte dei Paschi di Siena SpA posted better-than-expected profit in the third quarter in a boost to Chief Executive Officer Luigi Lovaglio following the takeover of rival Mediobanca SpA. Cellnex Telecom SA plans to spend as much as €500 million ($576 million) on share buybacks by the end of next year, boosting its previous pledge by €200 million as it seeks to make the stock more attractive to investors. China is allowing Dutch chipmaker Nexperia to export again from its operations in the country, setting the stage for the Netherlands to back down and suspend its powers over the Chinese-owned company. Olympus Corp.’s new Chief Executive Officer Bob White is shaking up the Tokyo-based medical devices maker after a difficult period that included the ouster of his predecessor in a drug scandal. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 1:30 p.m. New York time The Nasdaq 100 fell 1.2% The Dow Jones Industrial Average fell 0.4% The MSCI World Index fell 0.6% Bloomberg Magnificent 7 Total Return Index fell 1.7% The Russell 2000 Index fell 0.6% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1572 The British pound rose 0.2% to $1.3168 The Japanese yen was little changed at 153.19 per dollar Cryptocurrencies
Bitcoin rose 1.5% to $102,617.25 Ether rose 2.8% to $3,417.65 Bonds
The yield on 10-year Treasuries declined one basis point to 4.07% Germany’s 10-year yield advanced two basis points to 2.67% Britain’s 10-year yield advanced three basis points to 4.47% The yield on 2-year Treasuries declined two basis points to 3.53% The yield on 30-year Treasuries was little changed at 4.68% Commodities
West Texas Intermediate crude rose 0.6% to $59.76 a barrel Spot gold rose 0.7% to $4,005.20 an ounce ©2025 Bloomberg L.P.
